Sensex Advances to Record as Indian Banks Climb With Metalmakers

India’s benchmark stock index advanced to a record close, led by metalmakers and lenders, amid speculation the federal government budget next week will outline measures to strengthen the economy.

The S&P BSE Sensex (SENSEX) rose 1.3 percent to 25,841.21 at the close in Mumbai, advancing for a fourth straight day. Sesa Sterlite Ltd. (SSLT), the nation’s biggest zinc and aluminum producer, jumped the most in four weeks. HDFC Bank Ltd. (HDFCB) helped the S&P BSE Bankex post a third day of gains.

Investors are focused on the federal budget, due to be presented on July 10, after India raised railway passenger and freight fares last month. Newly elected Prime Minister Narendra Modi has said he’s ready to take unpopular steps to improve the nation’s fiscal health. Optimism about that has helped stocks rally even as the prospect of the worst monsoon since 2009 and higher oil prices threaten to reignite inflation.

“The pre-budget rally is here,” Gaurang Shah, vice president at Geojit BNP Paribas Financial Services Ltd., told Bloomberg TV India. “If the rain gods don’t play spoilsport and if inflation doesn’t scare us, then maybe in a couple of months, we’ll see rate cuts, which will be extremely positive for banking and interest-rate sensitive stocks.”

The monsoon, which accounts for more than 70 percent of the nation’s annual rainfall, has been 43 percent lower than a 50-year average since June 1, the India Meteorological Department said yesterday. Reserve Bank of India Governor Raghuram Rajan signaled last month the central bank would ease monetary policy if inflation slows more than anticipated.

Sesa, ICICI

The CNX Nifty Index on the National Stock Exchange of India Ltd. added 1.2 percent to 7,725.15.

Sesa Sterlite rose 4.7 percent and was the top gainer on the Sensex. Coal India Ltd. (COAL), the world’s largest producer of the fuel, increased the most in two weeks.

HDFC Bank climbed 2 percent, the most in three weeks. ICICI Bank Ltd. (ICICIBC) gained 1 percent, while State Bank of India, the nation’s largest lender, increased 0.8 percent. Sun Pharmaceutical Industries Ltd. climbed 2.1 percent to a record high.

The Sensex trades at 15.8 times projected 12-month profits, the most expensive level in more than three years. The MSCI Emerging Markets Index has a multiple of 11.

Overseas investors bought a net $37.8 million of Indian shares on June 27, taking this year’s inflows to $9.9 billion. That’s the second-highest amount among the eight Asian markets tracked by Bloomberg.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

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

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