Indian Equities Head for Biggest Weekly Advance in Two Months

Indian (SENSEX) stocks advanced, with the benchmark index set for its biggest weekly rally in two months. Financial companies and capital-goods makers led the gains.

ICICI Bank Ltd. (ICICIBC), the nation’s second-biggest lender by market value, surged 5 percent and was poised for its best week in more than four years. Mortgage provider Housing Development Finance Corp. (HDFC) added 1.7 percent. Engineering company Larsen & Toubro Ltd. (LT) and Bharat Heavy Electricals Ltd. (BHEL), the country’s biggest power-equipment producer, added more than 2 percent each. The rupee climbed for the third day.

The S&P BSE Sensex rose 1.2 percent to 19,202.83 at 12:30 p.m. in Mumbai, taking this week’s gain to 3.1 percent. Shares surged yesterday after the Reserve Bank of India Governor Raghuram Rajan announced plans to bolster the financial sector and support the rupee, which has slid 16 percent this year. The RBI said after the markets closed that it eased rules for some equity purchases by foreign investors.

“There is optimism due to positive sentiments by the new RBI governor,” Gajendra Nagpal, chief executive officer at New Delhi-based Unicon Financial Intermediaries Ltd., said by phone today. “The rupee is strengthening and investors are now more convinced about the durability of the rally in equities.”

Rajan announced plans on Sept. 4 to make it easier for banks to open branches and lend to non-state sectors of the economy, measures that JPMorgan Chase & Co. analysts say will have a “major long-term impact” on bank profits. The RBI will also provide swaps for banks’ foreign-currency deposits that Bank of America Merrill Lynch estimates will boost the nation’s reserves by $10 billion. The S&P BSE India Bankex of lenders jumped by the most since May 2009 yesterday.

ICICI, Larsen

ICICI Bank jumped 5.1 percent, extending this week’s rally to 17 percent, the most among Sensex companies. The 13-member Bankex added 1.6 percent, extending yesterday’s 9.3 percent surge. Housing Development rose 1.8 percent to 763.55 rupees.

Larsen gained 2.4 percent to 745.1 rupees. Bharat Heavy Electricals added 2.8 percent to 138.5 rupees, putting the S&P BSE India Capital Goods Index on course for the highest close in more than two weeks.

The Sensex has retreated 1.2 percent this year in local currency terms and is valued at 13.7 times projected 12-month earnings, compared with the five-year average of 14.1 times, data compiled by Bloomberg show. It has lost 18 percent this year in dollar terms. The MSCI Emerging Markets Index trades at 10.2 times, data compiled by Bloomberg show.

The CNX Nifty (NIFTY) on the National Stock Exchange increased 1.3 percent to 5,663. India VIX, which gauges the cost of protection against losses in the Nifty, fell 2.4 percent.

International investors bought a net $15.3 million of Indian shares on Sept. 4, data from the regulator show. That boosted this year’s net inflow to $11.4 billion, the second-highest among 10 Asian markets tracked by Bloomberg.

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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