Sensex Climbs to Fresh Record as ONGC, GAIL Surge on India Gas

India’s benchmark stock-index climbed to an all-time high for a second day as energy shares leaped on optimism Prime Minister Narendra Modi will agree to raise natural gas prices by the end of this month.

Oil & Natural Gas Corp. (ONGC), the country’s largest explorer, soared to a record and Reliance Industries Ltd. (RIL), owner of the world’s largest refining complex, jumped the most in two weeks. Natural-gas supplier GAIL India Ltd. (GAIL) rallied the most since May 2009, sending an index of energy stocks to a six-year high.

The S&P BSE Sensex (SENSEX) increased 1.5 percent to 25,396.46 at the close, exceeding the previous intraday record of 25,375.63 reached on May 16 after Modi’s Bharatiya Janata Party won the strongest electoral mandate in three decades. Foreigners have bought a net $8.2 billion of local shares this year, the most among eight Asian markets tracked by Bloomberg, on expectations the new government will boost efforts to revive economic growth.

“Investors are factoring the growth opportunity in India and are not willing to wait for the numbers,” Gopal Agrawal, chief investment officer with Mirae Asset Global Investments (India) Pvt. in Mumbai, said by phone today. Mirae is investing in industries most likely to benefit from a stronger economy including energy, logistics and capital goods, Agrawal said.

Oil & Natural Gas surged 11 percent to 465.65 rupees and Reliance climbed 3 percent to 1,122.40 rupees. GAIL advanced 7.9 percent. All three stocks were among the top gainers today in the Sensex.

The government may increase gas prices from July 1 after a new price formula is approved by the Cabinet, according to a government official yesterday, who asked not to be identified pending an announcement.

‘Modi Solution’

The former Congress party-led government approved a new formula last year for setting prices from April 1, 2014. The method would almost double rates for the locally produced fuel from $4.2 per million British thermal units. The Election Commission on March 24 ordered the oil ministry to defer the increase until general elections ended on May 16.

“The uncertainty over gas pricing seems to be drawing to a close now,” said Dhaval Joshi, a Mumbai-based analyst at Emkay Global Financial Services Ltd. “Modi’s intervention is expected to accelerate a solution to the issue.”

Each dollar increase in gas prices will increase ONGC’s annual revenue by 40 billion rupees ($677 million), Chairman D.K. Sarraf said on March 25. For every $1 increase in natural-gas prices and at a production rate of 15 million cubic meters a day, Reliance’s per share earnings will gain 1.5 percent in the year that began April 1, according to Mumbai-based IIFL Holdings Ltd.

Sugar Subsidy

The BSE Mid-Cap Index advanced 1.6 percent to the highest level since January 2008, while the BSE Small-Cap Index gained 1.6 percent to a 3 1/2-year high.

Sugar miller Bajaj Hindusthan Ltd. climbed to a 19-month high after a minister said the government may increase an export subsidy. Shree Renuka Sugars Ltd. (SHRS) soared 13 percent, the most since September, the third-biggest gainer on the S&P BSE 500 Index.

Tata Global Ltd., which operates Starbucks Corp.’s India venture, had the steepest gain in seven years. The company may announce “some corporate action” such as a merger with Tata Coffee or spin-off of some business, Amar Mourya, an analyst at India Nivesh Securities Ltd., said by phone.

The CNX Nifty Index rose 1.5 percent to a record 7,583.40. The Sensex rose 4.9 percent this past week, the most since the period ended May 16. It trades at 15.6 times projected 12-month profits, the most expensive since April 2011. The MSCI Emerging Markets Index is trading at a multiple of 10.9.

Foreign funds bought a net $216 million of local shares today, according to provisional data from the exchanges. They purchased a net $29.6 million of shares on June 4, according to data released yesterday by the market regulator.

To contact the reporters on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net; Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Ravil Shirodkar, Dick Schumacher

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