Indian Stocks Rise to 2-Week High as Oil Drops; Metals, ITC Gain

Indian (SENSEX) stocks climbed to a two-week high as a decline in oil prices countered the nation’s slowest economic growth in four years. Metalmakers and consumer goods companies led the increase.

Tata Steel Ltd. (TATA), the country’s biggest producer of the alloy, soared 5.6 percent, the top performer on the benchmark index today. Cigarette maker ITC Ltd. (ITC) jumped the most in two months after it raised prices. Reliance Industries Ltd. (RIL), owner of the world’s largest refining complex, rose to a five-week high. Brent oil fell as much as 1.6 percent.

The S&P BSE Sensex surged 1.4 percent to 18,886.13 at the close in Mumbai. Oil prices dropped after U.S. President Barack Obama delayed action against Syria by seeking approval from Congress, easing concern that an imminent strike would disrupt Middle East crude exports. Lower energy costs may help cool inflation and trim the current account deficit in India, which imports 80 percent of its oil requirements.

“The biggest relief is that there’s no strike on Syria and oil has cooled,” Kaushik Dani, a fund manager at Peerless Mutual Fund, which has about $685 million in assets, said by phone from Mumbai. “The long-term picture hasn’t changed much, but we are seeing some buying at lower levels.”

Tata Steel jumped 5.6 percent to 289.4 rupees. The stock rallied 27 percent in August, ending seven months of losses. Aluminum producer Hindalco Industries Ltd. (HNDL) gained 3.7 percent to 108.95 rupees. Jindal Steel & Power Ltd. climbed 2.8 percent to 227.95 rupees, after slumping 8.9 percent on Aug. 30.

Cigarette Prices

ITC jumped 3.8 percent to 320.4 rupees, the biggest gain since July 4. The company increased prices of Gold Flake and Classic Milds cigarette brands by about 10 percent, according to four distributors surveyed. ITC spokesman Nazeeb Arif did not respond to two calls to his cell phone. Hindustan Unilever Ltd. (HUVR) added 1.6 percent to 641.3 rupees, a five-week high. The two stocks have a combined 15 percent weighting in the Sensex.

Reliance climbed 3.9 percent to 886.75 rupees. Carmaker Maruti Suzuki India Ltd. (MSIL) rallied 4.5 percent to 1,300 rupees after its sales surged 61 percent in August from a year earlier.

ICICI Bank Ltd. (ICICIBC), the nation’s third-biggest lender by market value, rose 2.8 percent to 826.6 rupees. Axis Bank Ltd. (AXSB) surged 3.8 percent to 864.3 rupees. Yes Bank Ltd. jumped 3.9 percent to 252.95 rupees. The S&P BSE Bankex climbed, taking its three-day gain to 4.2 percent, the most since July 1. The gauge sank 10 percent last month, its fourth month of loss.

Monetary Tightening

India’s economy grew 4.4 percent in the June quarter, the weakest pace since 2009, a government report showed on Aug. 30, pressuring Prime Minister Manmohan Singh to stem a plunge in the rupee that led the Reserve Bank of India to increase two interest rates and tighten the supply of cash in July.

The Sensex added 0.5 percent last week as oil prices fell and Singh said policy changes in the past year will help shore up the currency. The rupee rebounded 4.6 percent from a record low in the past two days after the RBI said on Aug. 28 it will sell dollars to state-run oil buyers.

“Steps taken to arrest the rupee depreciation are showing some effect,” Peerless Mutual’s Dani said.

India’s gross domestic product growth increase in the June quarter compared with 4.8 percent in the prior three months. The median of 44 estimates in a Bloomberg News survey was for a 4.7 percent gain. HSBC Holdings Plc and Markit Economics today said the nation’s manufacturing purchasing managers’ index for August fell to 48.5 from 50.1 in July. A reading greater than 50 shows expansion, while less than 50 is contraction.

About 47 percent of Sensex companies that posted earnings for the June quarter missed analyst estimates. That compares with 27 percent for the March quarter, and 43 percent in the three months ended December, data compiled by Bloomberg show.

The Sensex is valued at 13.4 times projected 12-month earnings versus a five-year average of 14.1 times, data compiled by Bloomberg show. That compares with 10.2 times for the MSCI Emerging Markets Index.

The CNX Nifty (NIFTY) on the National Stock Exchange increased 1.4 percent to 5,550.75. India VIX, which measures the cost of protection against losses in the Nifty, lost 0.9 percent, its third day of drop.

--With assistance from Manish Modi in New Delhi and Santanu Chakraborty and Adi Narayan in Mumbai. Editors: Ravil Shirodkar, Thomas Kutty Abraham

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

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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