Indian Stocks Climb for Seventh Quarter on Foreign Fund Inflows

India’s stocks rose, with the benchmark index completing its longest stretch of quarterly gains, as the nation’s economic growth and corporate earnings lured investors to increase their holdings to a record.

State Bank of India, this quarter’s second-best performer in the main stock gauge, climbed to its highest level in at least 19 years. Overseas funds bought a net 8.95 billion rupees ($198.3 million) of Indian equities on Sept. 28, extending this year’s record inflows to 843.6 billion rupees, according to the nation’s market regulator. Hindalco Industries Ltd., the biggest aluminum producer, advanced 2.9 percent.

“India is in a sweet spot,” said Mahesh Patil, who manages the equivalent of $3 billion as head of local equities at Birla Sun Life Asset Management Co. in Mumbai. “People are finding the India growth story sustainable. The bull run will continue, the markets will remain in an upward trajectory.”

The Bombay Stock Exchange’s Sensitive Index, or Sensex, gained 112.78, or 0.6 percent, to 20,069.12. The gauge rose 13 percent for a seventh straight quarterly advance. The increase is the most after Brazil among the world’s 10 largest markets.

Election Pledge

India’s key stock measure has climbed every quarter since Prime Minister Manmohan Singh in May 2009 led the Congress party to its biggest electoral victory in two decades, pledging to cut a fiscal deficit and boost economic growth. The gauge’s 12 percent climb this month is its best since the government took office.

The S&P CNX Nifty Index on the National Stock Exchange rose 0.7 percent to 6,029.95. The BSE 200 Index increased 0.2 percent to 2,530.47.

State Bank added 1.4 percent to 3,240.45 rupees, extending its advance this quarter to 41 percent. Housing Development Finance Corp., the biggest mortgage lender, rose 3.7 percent to 733.2 rupees, advancing 25 percent this year.

Hindalco climbed 2.9 percent to 197.05 rupees, extending gains this quarter to 37 percent. The stock was the best performer on the Sensex among metal producers. Sterlite Industries (India) Ltd., the biggest copper and zinc producer, advanced 3.4 percent to 166.9 rupees.

India’s gross domestic product expanded 8.8 percent last quarter from a year earlier, the most among major economies in Asia after China.

Fund Flows

“The Indian economy is going to quadruple in the next 10 to 12 years,” Sunil Singhania, head of equities at Reliance Capital Asset Management Ltd., India’s biggest money manager, with $23 billion in assets, said on Sept. 29. “Foreign inflows will continue over the next five to six years.”

Foreigners bought $11.5 billion of stocks this quarter, the most on record. Foreign fund inflows to India’s equities have increased 50 percent this year, helping boost the Sensex to its highest level in more than 2 1/2 years this month. The gauge has climbed 15 percent this year, the most among the world’s 10 largest stock markets by value, according to data compiled by Bloomberg.

Billionaire investor Rakesh Jhunjhunwala said last week Indian equities are set for a “multiyear” bull market.

The inflows also made the benchmark index the most expensive in Asia and among the BRIC markets that also include Brazil, Russia and China.

“In the near term, we are not cheap, but if someone is investing for the long term he need not worry about the near term,” Singhania said. “If the economy grows at 8 percent, then corporate earnings might grow at more than 20 percent in the next two three years.”

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