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India’s Nifty Futures Climb on Reform Outlook, Cyprus Agreement

India stock futures rose, signaling shares may rebound after the biggest weekly loss in 15 months.

SGX CNX Nifty Index futures for March delivery climbed 0.6 percent to 5,697 at 10:06 a.m. in Singapore. The underlying CNX Nifty (NIFTY) Index fell 0.1 percent to 5,651.35 on March 22. The S&P BSE Sensex (SENSEX) index dropped 0.3 percent to 18,735.60. The gauge fell 3.6 percent last week, the steepest fall since the five days ended Dec. 16, 2011. The Bank of New York Mellon India ADR Index of U.S.-traded shares lost 0.3 percent. Derivative contracts expire on March 28 and Indian markets are closed on March 27 and March 29 for public holidays.

India eased investment rules for foreign funds buying government and corporate bonds on March 23, lessening concerns Prime Minister Manmohan Singh’s reform agenda may be undermined by the exit last week of the ruling coalition’s biggest ally. The MSCI Asia Pacific Index (MXAP) climbed 0.7 percent after Cyprus agreed to the outlines of an international bailout, moving the country toward eliminating the threat of default and an exit from the euro.

“Despite the political developments, we think reforms are unlikely to be reversed” in India, according to a Deutsche Bank AG note dated today.

The Sensex slumped last week as the lower house of parliament was adjourned for a third day amid accusations the administration worked with the Sri Lankan government to “water down” a United Nations Human Rights Council resolution on alleged wartime atrocities in the island nation. The Dravida Munnetra Kazhagam party withdrew from the coalition on March 19 over the issue, leaving Singh’s alliance 44 seats short of a majority.

Bond Limits

The accord between Cyprus and the “troika” representing international lenders was reached in overnight talks in Brussels and ratified by finance ministers from the 17-nation euro area, as the European Central Bank threatened to cut off emergency financing the country’s tottering banks. The European Union accounted for 17.2 percent of India’s exports in the six months ended September 2011, according to the commerce ministry, making it India’s largest trading partner.

The government will remove all restrictions and sub-limits on overseas buying of state and corporate bonds starting April 1, keeping the cap for sovereign debt at $25 billion and $51 billion for securities issued by companies, Finance Minister Palaniappan Chidambaram said on March 23.

Foreign Funds

The measure is the latest in a series of policy changes Chidambaram has spearheaded since September to revive a faltering economy, including opening up aviation and retail industries to foreigners. The government estimates India needs more than $75 billion of foreign capital this year and next to fund the current-account deficit, which widened to $22.3 billion in the three months to Sept. 30, or 5.4 percent of gross domestic product.

“It makes it easier for foreign institutional investors,” said Prasanna Ananthasubramanian, an economist at ICICI Securities Primary Dealership Ltd. in Mumbai. “It will increase the ticket size of investments since the sub-limits have been removed. It will widen the pool of foreign investors.”

Shares of Indian Oil Corp. (IOCL), the nation’s largest refiner, may be active after the company raised diesel prices by 45 paise per liter, effective March 23. Stocks of Hindustan Petroleum Corp. and Bharat Petroleum Ltd., which typically follow Indian Oil’s price changes, may also move.

Overseas funds bought a net $75.7 million of Indian stocks on March 21, according to data from the market regulator. That boosted net purchases this year to $9.86 billion, a record for the period, according to data compiled by Bloomberg.

The Sensex has retreated 3.6 percent this year amid the weakest economic growth in a decade, the highest inflation among major emerging markets and as more company earnings missed estimates in the three months ended Dec. 31 compared with the previous quarter.

The gauge trades at 12.7 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s 10.4 times.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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