State Bank advanced to its highest level since December after the U.S. investment bank advised investors to buy shares and increased its price target by 44 percent. A measure of 12 lenders rallied to a 10-month high. Bharti Airtel Ltd. (BHARTI) was the biggest gainer on the S&P BSE Sensex. (SENSEX) State-owned explorer Oil & Natural Gas Corp. (ONGC) climbed to its highest level in nine months.
The Sensex rallied 0.5 percent to 22,214.37 at the close. The gauge has risen 4.9 percent this quarter, beating stocks in Brazil, Russia and China, as improving government finances and cooling inflation boost confidence. Foreigners have bought $8.8 billion of local shares and bonds this year, the highest among eight Asian markets tracked by Bloomberg, before the elections starting next month.
“India’s economy has bottomed out and will see an improvement,” Ayaz Ebrahim, chief investment officer for Asia ex-Japan at Amundi Hong Kong Ltd., which manages $1 trillion globally, said in an interview to Bloomberg TV India today.
State Bank jumped 3.9 percent to 1,837 rupees. The lender was upgraded to buy from neutral at Goldman Sachs and its price target raised to 2,080 rupees. Punjab National Bank rallied 3.8 percent to its highest level since June 19 and Bank of Baroda added 2.4 percent. Goldman raised Punjab National to neutral from sell, and Bank of Baroda to buy from neutral.
Power-equipment maker Bharat Heavy Electricals Ltd. (BHEL) rose to its highest level since May 31, 2013. Bharti Airtel jumped 4.1 percent, a fifth day of advance. Oil & Natural Gas increased 3.1 percent, taking this month’s rally to 14 percent.
The CNX Nifty Index rose 0.6 percent to a record 6,641.75 after rising as high as 6,673.95 intraday. The gauge’s March futures, which expired today, settled at 6,641.75. Derivatives contracts in India expire on the last Thursday of every month.
“Some investors were forced to cover their shorts after the Nifty climbed past the psychological level of 6,600, which led to a spurt in the last hour of trade,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd., said by telephone from Bengaluru. “This is a liquidity-driven, pre-election rally.”
The opposition Bharatiya Janata Party, favored by investors seeking a change to revive the economy, is leading in opinion polls as voters punish Prime Minister Manmohan Singh’s Congress party for graft scandals, elevated inflation and the slowest economic growth in a decade. Congress is headed for its worst-ever electoral performance, polls show.
The rupee has risen 2.8 percent this month, the most among major Asian currencies, as global funds pour money into Indian assets. Overseas investors bought a net $171 million of shares on March 26, taking this month’s stock inflows to $2.8 billion, data compiled by Bloomberg show.
The Sensex trades at 14 times projected 12-month earnings, compared with the average multiple of 14.5 over the past five years. The MSCI Emerging Markets Index trades at 8.7 times, near the cheapest level since October 2011.
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