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India Stock Futures Gain as Funds Continue Record Buying

April 10 (Bloomberg) -- India’s benchmark stock index rose for the first time in three days, led by consumer-goods makers, amid optimism their earnings will withstand costlier credit and a slowdown in the economy better than other companies.

Hindustan Unilever Ltd. rallied the most in two weeks. ITC Ltd., India’s biggest cigarette maker, and Nestle India Ltd., a unit of the world’s largest food company, rallied to a record. Indraprastha Gas Ltd., which supplies natural gas in New Delhi, lost as much as half its value after the regulator cut rates for carrying the fuel in the nation’s capital.

The BSE India Sensitive Index, or Sensex, rose 0.1 percent to 17,243.84 at the close. The gauge has risen 12 percent this year as foreigners have poured a net $9.1 billion into stocks even as the nation’s economy grew at the slowest pace in almost three years last quarter. Net flows into emerging-nation equity funds have totaled $25.63 billion in 2012, versus outflows of $18 billion in the year-ago period, EPFR Global said April 4.

Consumer goods, technology and pharmaceutical companies’ earnings are less “impacted by government policy or the fiscal situation or interest rates,” Nirmal Jain, chairman of IIFL Ltd., a Mumbai-based brokerage, told Bloomberg UTV. India will gain from “benign capital flows to emerging markets, although it will remain volatile because there will be some data point which will not be as expected,” he said.

Expectations for interest-rate cuts that helped fuel this year’s rally have been tempered after Finance Minister Pranab Mukherjee projected record government borrowing to fill a gap in finances. He missed his deficit target by the most in three years and forecast the fiscal gap would narrow to 5.1 percent of GDP in the year from April 1, Mukherjee said in his budget speech on March 16. The central bank left the key interest rate unchanged at 8.5 percent at meeting on March 15. It next meets on April 17.

Earnings Outlook

Corporate profit growth has slowed as costlier credit hurt consumer spending and dented investment. Earnings forecasts for Sensex companies for the year ended March fell 8.7 percent to 1,150 rupees a share earlier in 2012, the biggest drop in three years, estimates compiled by Bloomberg show. The Sensex trades at 13.3 times future earnings, compared with 10.5 times on the MSCI Emerging Markets Index.

“The week will signal the start of the earnings season, with bellwether Infosys declaring numbers on Friday, and the all-important RBI meet,” Sharmila Joshi, head of equity at Fairwealth Securities Ltd., said in an e-mail. “We will also deal with inflation numbers and monthly industrial production data before the week is out. The stage is set for markets to decisively indicate their direction.”

Factory Output

Industrial output grew 6.6 percent in February, compared with a 6.8 percent growth in January, according to the median estimate of 27 analysts in a Bloomberg survey. The data are released on April 12. Wholesale prices grew 6.7 percent in March, compared with 6.95 percent in February, according to the median estimate of 24 analysts surveyed by Bloomberg. The figure is announced on April 16, the day before the central bank’s policy review.

India VIX, which measures the cost of protection against declines in the S&P CNX Nifty Index, fell 1.8 percent to 21.92. The Nifty added 0.2 percent to 5,243.60 and its April futures settled at 5,266.15. The BSE 200 Index increased 0.1 percent.

A total 716 million shares changed hands on the BSE and NSE yesterday, 22 percent less than the daily average in the past 12 months, according to data compiled by Bloomberg.

Hindustan Unilever surged 2.6 percent to 414.95 rupees, the most since March 27. ITC gained 2.4 percent to 229.35 rupees and Nestle India jumped 4.5 percent to 4,784.15 rupees.

Sun Pharmaceutical Industries Ltd., the most valuable drugmaker, gained 1.4 percent to 566.80 rupees, ending a three-day fall. State Bank of India, the nation’s biggest lender, advanced 2.4 percent to 2,151.20 rupees.

Auto Sales

Tata Motors Ltd., the owner of Jaguar Land Rover, rose the most in a month, adding 3 percent to 283.75 rupees. Mahindra & Mahindra Ltd., the largest maker of sport-utility vehicles and tractors, rose 1.6 percent to 694.30 rupees. The Society of Indian Automobile Manufacturers estimates that sales will gain 10 percent to 12 percent in the year ending March 31, 2013, after the slowest growth in three years in the previous period. Monthly sales reached records in January, February and March, the industry group said today.

Indraprastha sank as much as 51 percent to 170 rupees and settled 34 percent lower at 229.15 rupees. GAIL India Ltd., the nation’s biggest natural-gas supplier which holds 22.5 percent stake in Indraprastha, tumbled 2.1 percent to 355.60 rupees. Bharat Petroleum Corp., which also holds 22.5 percent in Indraprastha, dropped 1.9 percent to 667.50 rupees.

India’s petroleum regulator cut pipeline transportation rates to 38.58 rupees (75 U.S. cents) per million BTU compared with 104.05 rupees sought by Indraprastha, according to an April 9 order. Gas compression costs in New Delhi were reduced to 2.75 rupees a kilogram from 6.66 rupees. The changes are effective from April 1, 2008.

“We see significant negative impact of the order on long-term profitability and valuations” of Indraprastha Gas and Gujarat Gas, Equirius Securities Pvt. said in a report.

Petronet LNG lost 3.1 percent to 159.75 rupees. Gujarat Gas Co. Ltd. sank 15 percent to 342.85 rupees.

Overseas investors sold a net 2.53 billion rupees ($49.3 million) of local stocks yesterday, paring their investment in the equities this year to 455 billion rupees, according to the nation’s market regulator.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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