Indian (SENSEX) stocks rose, with the benchmark gauge advancing for a second week, on speculation state election results this weekend will confirm gains for the nation’s main opposition party.
Tata Power Co. (TPWR) surged to a more than four-month high, helping a gauge of power companies to the highest level since June. Axis Bank Ltd. (AXSB) jumped 3.1 percent, sending a measure of lenders to an almost five-month high. Motorcycle maker Hero MotoCorp Ltd. (HMCL) jumped 2.2 percent after CLSA Asia Pacific Markets raised the stock to outperform.
The S&P BSE Sensex rose 0.2 percent to a one-month high of 20,996.53 in Mumbai, extending its weekly gain to 1 percent. Stocks rallied as an exit poll showed the opposition Bharatiya Janata Party, which picked Narendra Modi as its choice for prime minister, was poised to win four of five state elections to give it momentum ahead of national voting next year. Modi, the chief minister of Gujarat since 2001, has overseen annual economic growth of 10 percent on average for his state.
“The election optimism is giving the market a fillip,” said Anand Tandon, chief executive officer of Kochi-based JRG Securities Ltd. (JRGS) “But for the markets to rally sustainably, we need an improvement in the economic fundamentals.”
Coal India Ltd. (COAL), the world’s biggest producer, jumped 3.4 percent. The S&P BSE Capital Goods Index gained 0.8 percent.
Tata Power surged 5.9 percent to 88.40 rupees, driving the S&P BSE Power Index 2.3 percent to its best since June 7.
“We are hearing that the government will soon announce reform measures for power projects, especially ultra-mega power projects,” Suniil Pachisia, vice president of Pratibhuti Viniyog Ltd., said by phone today. “If that comes through, the profitability of power companies will go up.”
Bajaj Hindusthan Ltd. rallied 5.8 percent while Balrampur Chini Mills Ltd. (BRCM) gained 2.8 percent after Agriculture Minister Sharad Pawar said the government will give incentive for production of raw sugar in 2013-14 season.
“We were expecting a relief package for the sugar industry and that has come through,” Pratibhuti’s Pachisia said.
Hero MotoCorp rallied the most since Nov. 25. CLSA upgraded the stock from sell, saying sales will improve due to rural demand.
The Sensex will climb as much as 6 percent to a record by year-end if state election results this weekend confirm gains by the BJP, according to the average of 10 estimates compiled by Bloomberg. The gauge will rise to almost 22,200 from its closing level of 20,957.81 yesterday, the survey showed.
India’s economy posted its slowest growth in a decade last year and suffered its worst power crisis in July 2012, eroding investor confidence in the leadership of Prime Minister Manmohan Singh’s Congress party.
“Volatility is likely to pick up as the state election results will be announced on Dec. 8,” Gaurang Shah, assistant vice president at Geojit BNP Paribas Financial Services Ltd. (GBNP), said by e-mail. “It is advised to book profits at higher levels and stay light on long positions.”
Overseas investors have purchased a net $17.7 billion of Indian equities this year, the most in Asia after Japan, data compiled by Bloomberg show. They bought a net $1.1 billion of stocks in November, the third monthly inflow, the data show.
The Sensex has climbed 8.1 percent this year, the best performer among the four largest emerging markets, and trades at 13.7 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 10.5 times.
The CNX Nifty (NIFTY) Index on the National Stock Exchange of India Ltd. rose 0.3 percent to 6,2539.90.
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