Indian Stocks Climb on Policy Reform Speculation

Indian stocks climbed the most in more than a week amid speculation the government will revive its economic reform agenda after today’s presidential polls.

Tata Motors Ltd., the owner of Jaguar Land Rover, rose for the first time in seven days. Infosys Ltd., the second-largest software exporter, surged the most in two months. Maruti Suzuki India Ltd., the biggest carmaker, plunged the most in two years after violence at its factory. The BSE India Sensitive Index rose 0.6 percent to 17,278.85 at close, the most since July 10.

Mamata Banerjee, the chief minister of West Bengal state who has opposed key parts of Prime Minister Manmohan Singh’s policy agenda, ended her opposition to the ruling Congress party’s pick of Pranab Mukherjee to be India’s next president. Ratan Tata, chairman of Tata Sons Ltd., which manages India’s biggest business group, said today Singh must restore the credibility of his government and put the nation on a “growth path once again.”

“The focus is entirely on New Delhi right now,” Pratik Gupta, head of equities at Deutsche Equities India Pvt., told Bloomberg UTV today. “A lot of policy steps need to be taken. Some of these are politically sensitive, which can be taken once the presidential election is out of the way. The coalition is looking relatively stronger now.”

Singh’s government has seen its agenda stymied by opposition from its own allies, including Banerjee’s Trinamool party, and last year suspended a plan to allow Wal-Mart Stores Inc. and other overseas companies to open supermarkets. An anti-corruption bill and proposals to allow foreign direct investment in aviation and pensions are also stalled.

‘Remove Roadblocks’

Singh needs to implement reforms, remove “roadblocks” to growth, and control crony capitalism, Tata said in a statement posted on his Twitter account. “For the sake of the country, we all hope he will.” Tata blamed opposition parties and corruption for bringing “government action to a standstill.”

Still, concerns linger that deficient monsoon rains may curb farm output, stoking food costs and hampering efforts to cool inflation that the central bank deemed too high last month to reduce interest rates and boost an economy growing at the weakest pace in almost a decade. Seasonal rainfall has been 22 percent below a 50-year average since June 1. Food prices rose 10.9 percent from a year earlier in June.

“With the poor start to this year’s monsoon threatening a further ratchet effect on food prices, our base case remains for the Reserve Bank of India to stand pat on rates at its upcoming policy review,” Richard Iley, analyst at BNP Paribas SA, wrote in a note e-mailed today. The central bank meets on July 31 to review monetary policy.

VIX Drops

India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index, plunged 6 percent to 16.38, its lowest in almost two years. The Nifty rose 0.5 percent to 5,242.70 and its July futures settled at 5,257. The BSE-200 Index rose 0.4 percent. Combined volume on the nation’s top two bourses was 802 million shares yesterday, 11 percent less than the 12-month daily average of 903 million shares.

Tata Motors gained 1.4 percent to 224.8 rupees, ending a six-day 10 percent tumble. Infosys surged 3 percent to 2,245.2 rupees. The stock has lost 9 percent since June 12 after cutting its sales forecast and reporting first-quarter profit that missed estimates.

Bharat Heavy Electricals Ltd., the biggest power-equipment maker, climbed 2.5 percent to 234.85 rupees. ICICI Bank Ltd., the second-biggest lender, rose 1.2 percent to 950.85 rupees. Sterlite Industries (India) Ltd., the biggest copper and zinc producer, increased 2.5 percent to 105.95 rupees.

Manesar Violence

Maruti Suzuki plunged 8.9 percent to 1,117.3 rupees, its biggest loss since July 26, 2010. One person died and more than 70 management workers were injured after violence erupted at the company’s factory at Manesar near New Delhi, Gurgaon Police Commissioner K.K. Sindhu said in a telephone interview today.

Hero MotoCorp Ltd. fell 1.2 percent to 2,088.7 rupees. The motorcycle maker today reported net income of 6.15 billion rupees ($112 million) in the quarter ended June 30, less than the 6.34 billion rupees estimated by 37 analysts in a Bloomberg News survey.

Dr. Reddy’s Laboratories Ltd., the second-biggest drugmaker, declined 1.1 percent to 1,654.55 rupees after reporting first quarter net profit of 3.36 billion rupees, lower than the 3.69 billion rupees estimated by 23 analysts.

The Sensex has gained 12 percent this year and trades at 13.5 times estimated earnings. The MSCI Emerging Markets Index trades at 10.2 times estimated profits.

Four out of seven, or 57 percent, of companies on the Sensex that have reported June-quarter results have missed analysts’ estimates, according to data compiled by Bloomberg.

Foreign investors bought domestic shares for a 13th day yesterday, the longest run of net purchases since February, data from the regulator show. They have invested a net $10 billion in Indian equities this year, the highest in Asia and a record for the period.

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