India Stock Futures Swing Between Gain, Loss on Deficit

Indian stocks climbed the most in Asia as overseas funds continued to buy local shares even amid concerns weakening government finances may slow economic growth.

Tata Consultancy Services Ltd., the nation’s largest software maker, rose the most in about four months. Larsen & Toubro Ltd., the biggest engineering company, jumped 4.6 percent, ending four days of losses. DLF Ltd., the biggest developer, climbed the most in three weeks.

The BSE India Sensitive Index, or Sensex, advanced 1.7 percent to 17,601.71 at the close in Mumbai. Foreign funds have bought a net $8.9 billion of local shares this year, a record for the period, even as corporate-profit growth slows, interest rates remain at a three-year high, oil prices jump and the government struggles to tackle a widening fiscal gap.

“A rally here has to be led by foreign money because you don’t have a catalyst in the local market,” Sadanand Shetty, a senior fund manager at Taurus Asset Management Co., which manages about $910 million, said by phone today. “Foreign flows is the only trigger left for a sustained rally.”

Finance Minister Pranab Mukherjee missed his deficit target by the most in three years and forecast the fiscal gap would narrow to 5.1 percent in the year from April 1. The gap in the year ending March 31 will be 5.9 percent of GDP, more than the goal set last year, he said on March 16.

Aside from increasing taxes, Mukherjee proposed capping a subsidy program spanning diesel and cooking gas to fertilizers to less than 2 percent of GDP, starting in the year ending in March 2013. Higher oil prices deepen losses for state refiners, which are forced to sell fuels below cost to cap prices. Brent crude, the benchmark for almost all of India’s imports, is up 16 percent this year, fueling inflation and limiting the RBI’s scope to reduce interest rates.

Monetary Policy

The Sensex has risen 14 percent this year as foreign funds made purchases on optimism slowing inflation will spur the RBI to ease monetary policy. The gauge trades at 15.5 times future earnings, compared with 10.7 times on the MSCI Emerging Markets Index. The central bank left the benchmark rate unchanged at a policy meeting on March 15 after a record 13 increases between March 2010 and October last year.

“The market had run a little bit ahead of itself on what the RBI could do,” Andrew Holland, chief executive officer of investment advisory at Mumbai-based Ambit Capital Pvt., told Bloomberg UTV today. “After the budget, perhaps the quantum of the rate cuts has been tempered down somewhat.”

The S&P CNX Nifty Index on the National Stock Exchange of India added 1.7 percent to 5,364.95. Its April futures settled at 5,438.55. India VIX, which measures the cost of protection against declines in the Nifty, lost 4.3 percent to 21. The BSE 200 Index gained 1.8 percent to 2,185.65.

A combined 913 million shares changed hands on the BSE and NSE yesterday, equivalent to the daily average of 915 million shares in the past year, data compiled by Bloomberg show.

Software Shares

Tata Consultancy Services surged 3.6 percent to 1,175.75 rupees, its steepest climb since Dec. 2. JPMorgan Chase & Co. analyst Viju K George raised the price estimate on the company to 1,300 rupees from 1,250 rupees, while keeping the overweight rating unchanged, according to a report dated yesterday. The stock may outperform the average total return of the stocks covered by the analyst in the next six to twelve months, the report said. Infosys Ltd., the second-biggest software exporter, rose 1.9 percent to 2,882.1 rupees.

Larsen & Toubro soared 4.8 percent to 1,346.4 rupees, ending a four day, 7.8 percent declined. DLF added 4 percent to 203.55 rupees. Reliance Industries Ltd., the most valuable company, rose 1 percent to 768.05 rupees.

TTK Prestige Ltd., a kitchen appliances maker, surged the most in 14 months after it was rated buy in new coverage at CLSA Asia-Pacific Markets with a price estimate 26 percent higher than yesterday’s close. The stock rallied 14 percent to 3,179.65 rupees, the biggest gainer on the BSE-500 Index.

Overseas investors bought a net 1.96 billion rupees ($39 million) of local stocks yesterday, raising total investments in equities this year to 440.3 billion rupees, according to the nation’s market regulator.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE