India Stocks Gain as Software Shares Rally Amid Strong U.

Indian stocks increased, paring a monthly loss, as software exporters gained after the benchmark gauge for U.S. equities capped the best week in a month.

Tata Consultancy Services Ltd., India’s largest software maker, advanced to a two-month high. Infosys Ltd., the second biggest, rose to a two-week high. The two companies earn more than half their revenues from North America, data compiled by Bloomberg show. The Standard and Poor’s 500 Index climbed 1.8 percent last week, the most since March 16, as company earnings exceeded forecasts.

The BSE India Sensitive Index, or Sensex, rose 0.8 percent to 17,318.81 at close. The gauge still had its second straight monthly loss, declining 0.5 percent. Tata Consultancy Services is valued at 19.1 times future earnings and Infosys trades at 15 times, compared with a multiple of 15.9 times on the 10-member BSE IT Index, according to data compiled by Bloomberg.

“We have chunky stakes in Tata Consultancy and Infosys; when these stocks are trading at low or mid-teens, it is good to build your portfolio around them if you have a long-term perspective,” Adrian Lim, a Singapore-based senior investment manager at Aberdeen Asset Management Plc, told Bloomberg UTV today. Aberdeen held 0.71 percent stake in Tata Consultancy at the end of February and owned 3.7 percent of Infosys on March 30, according to data compiled by Bloomberg.

The Sensex has risen 12 percent this year as foreign funds pumped $8.72 billion into local stocks on optimism the central bank would ease monetary policy after a record tightening in funding costs slowed economic growth, eroded company profits and as rifts within Prime Minister Manmohan Singh’s coalition led to a policy deadlock.

Net Sellers

Still, overseas funds are poised to turn net sellers of the nation’s shares for the first month this year, deterred by proposed changes in tax rules. They have withdrawn an average $8.4 million a day of stocks this month, compared with daily purchases of $82 million in March, according to data from the nation’s market regulator.

The S&P CNX Nifty Index on the National Stock Exchange of India added 0.8 percent to 5,248.15. India VIX, which measures the cost of protection against losses in the Nifty, increased 1.2 percent to 17.8. The BSE-200 Index added 0.7 percent.

Tata Consultancy surged 3.7 percent to 1,246.6 rupees, the highest since Feb. 27. Infosys jumped 2.8 percent to 2,462.1 rupees, highest level since April 12.

Reliance Power Ltd., the utility controlled by billionaire Anil Ambani, gained the most in two months after a report that a ministerial panel reiterated surplus coal at its Sasan plant can be used for other projects. The stock surged 6.4 percent to 107.05 rupees, extending its year-to-date gain to 51 percent.

Power Cuts

The decision may remove a hurdle for Reliance Power to proceed with the $4.2 billion plant being built in central India’s Madhya Pradesh state. Sasan is one of 16 coal-based power projects planned to help Asia’s second-fastest growing major economy meet electricity demand and cut blackouts.

Bharat Heavy Electricals Ltd. fell 2.1 percent to 224.75 rupees after the Press Trust of India reported the Rajasthan government scrapped tenders worth 120 billion rupees ($2.3 billion) awarded to the nation’s largest power equipment maker for two thermal power projects in the state. Two calls made to BHEL Chairman B. Prasad Rao’s mobile phone were not answered.

Jindal Steel & Power Ltd., India’s biggest producer of the alloy, and Maruti Suzuki India Ltd., the largest carmaker, both reported first-quarter profits that exceeded analyst estimates. Two out of nine, or 22 percent, of Sensex companies that have posted March-quarter earnings trailed forecasts, compared with 47 percent in the previous quarter.

Beating Estimates

Jindal Steel added 3.6 percent to 504 rupees. The company reported a quarterly net income of 11.7 billion rupees ($222.7 million), compared with the median estimate of 11.6 billion rupees in a Bloomberg News survey. Earnings were announced on April 27 after markets closed.

Maruti Suzuki dropped 1.8 percent to 1,371.9 rupees. The carmaker reported quarterly net income of 6.4 billion rupees, compared with the 5.56 billion-rupee forecast of 43 analysts in a Bloomberg News survey, as a revival in demand in Asia’s third-biggest auto market led to record sales.

Still, the outlook for Indian equities is “increasingly bleak,” with a “5 percent to 10 percent downside risk in the near term,” Nomura Capital Markets Plc analysts, led by Prabhat Awasthi, wrote in note dated today.

“Short of an urgent fiscal correction, we believe the outlook for equities is looking increasingly bleak,” according to the report. ‘It is likely investments would be edged out by consumption and trend growth expectations would come down. Our sector allocation has become more defensive and we are now underweight banks and real estate and turning overweight on the oil and gas and metals sectors.’’

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