The BSE India Sensitive Index increased 0.3 percent to 20,101.82 at the close, with volumes exceeding the 30-day average by 16 percent. Reliance, owner of the world’s largest refining complex, climbed to more than a 19-month high after third-quarter net income rose the most in two years. Bharat Heavy Electricals Ltd. (BHEL), the biggest power-equipment producer, rallied the most in a month.
The Sensex surpassed 20,000 last week for the first time in two years, as the government allowed refiners to increase diesel prices to cut the nation’s budget deficit. The decision is the latest in a series of measures announced since September by the government to boost economic growth. The gauge may climb to 22,500 this year if policy measures are sustained, Deutsche Bank AG wrote in a Jan. 15 report.
“The market is betting on two things: the reforms coming through will feed into the economy later this year, and if you have rate cuts then that will help the economy turnaround,” Jyotivardhan Jaipuria, head of India research at Bank of America Corp., said in an interview to Bloomberg TV India today.
Reliance, controlled by billionaire Mukesh Ambani, posted a 24 percent increase in December-quarter profit after trading ended on Jan. 18. Net income increased 24 percent to 55 billion rupees, surpassing the 50.1 billion rupee median estimate in a Bloomberg News survey. The stock advanced 2.2 percent to 919.95 rupees, the highest close since June 13, 2011.
Only one out of 10 Sensex companies that have reported December-quarter earnings has trailed forecasts. That compares with 40 percent of index firms in the three months ended Sept. 30, the same as for the three months ended June, data compiled by Bloomberg show.
Housing Development Finance Corp. (HDFC), the largest mortgage lender, today said profit increased 16 percent to 11.4 billion rupees, matching analysts estimates. The stock fell 1.2 percent to 812.5 rupees. NTPC Ltd. (NTPC), the largest power producer, said profit rose 22 percent to 26 billion rupees, beating estimates. The shares fell 1.8 percent to 161.6 rupees, after jumping 7.7 percent last week.
“Earnings have been downgraded massively for the last two years and we are now probably somewhere close to the end of the downgrade cycle,” Jaipuria said. “If things start changing in terms of interest-rate cuts and reforms, the market is willing to ignore the short-term macro news.”
Eleven of 14 analysts in a Bloomberg News survey predict the repurchase rate will be cut by 25 basis points at a Jan. 29 review, while two forecast a 50 basis point reduction. The rate was last pared by half a percentage point in April. The wholesale-price index rose 7.18 percent in December from a year earlier, the least since 2009, government data showed last week.
Bharat Heavy jumped 2.5 percent to 232.05 rupees. Maruti Suzuki India Ltd. (MSIL), the biggest carmaker, added 1.8 percent to 1,574.6 rupees. Larsen & Toubro Ltd. (LT), the largest engineering company, increased 2 percent to 1,567.35 rupees.
Prime Minister Manmohan Singh’s measures to revive growth helped attract $24.5 billion of foreign inflows into India’s stocks last year, the highest among 10 Asian markets tracked by Bloomberg, excluding China. Foreigners have bought a net $2.5 billion of shares this year, 82 percent more than at the same time in 2012, data from the regulator show.
“Global easy money is heading toward equities and India remains a preferred market for flows,” said Jaipuria. “Foreign investor sentiment toward India remains strong.”
The S&P CNX Nifty Index (NIFTY) on the National Stock Exchange of India added 0.3 percent to 6,082.30. The India VIX index, which gauges the cost of protection against losses in the Nifty, lost 1.7 percent to 13.66. The BSE Mid-Cap Index fell 0.1 percent.
The Sensex has gained 3.5 percent this year and trades at 16 times estimated earnings, the highest since February. The MSCI Emerging Markets Index is valued at 11 times, according to data compiled by Bloomberg.
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