India’s benchmark stock index had its third weekly advance as foreign investors increased the holding of the nation’s shares amid signs the global economic recovery is strengthening.
The BSE India Sensitive Index, or Sensex, increased 0.2 percent to 17,691.08 at the close, taking this week’s gains to 0.8 percent. The market is closed on Aug. 20 for Eid holiday. Tata Motors Ltd. climbed for a third day after Jaguar Land Rover sales surged 41 percent in July. Hindustan Unilever Ltd., the biggest home-products maker, rallied to a record.
The Sensex pared gains of as much as 0.8 percent after the state auditor said the policy of giving away coal mines without auction may have cost the government $33 billion. The report comes at a time when the government is battling a series of graft charges that have slowed down decision making and impeded reforms. Jindal Steel & Power Ltd. and Tata Power Co. paced decline among their peers after the report.
“It will be a dangerous situation if reforms are stalled and we lose the confidence of foreign investors,” said Deven Choksey, managing director at K.R. Choksey Shares & Securities in Mumbai. “The current rally has been driven by liquidity.”
Prime Minister Manmohan Singh said Aug. 15 the nation must treat measures to boost economic growth as a matter of national security, prompting speculation the government will increase efforts to revive its development agenda.
The Sensex has increased 15 percent this year, helped by record overseas investor purchases. Foreign funds bought a net $24 million of stocks yesterday, the 14th consecutive day of net purchases, taking their investments in equities this year to $11.4 billion, data from the regulator show. That’s an all-time high for the period and the most this year among 10 Asian markets tracked by Bloomberg.
Singh has struggled to salvage his reform plans as policy gridlock over attempts to open up the economy, graft scandals and elevated inflation deter investment. The economy expanded at its slowest pace in almost a decade in the March quarter.
Growth may be a “little better” than last year, Singh said Aug. 15, adding that the weakest monsoon in three years may make it difficult to curb price increases. The economy may expand 6.7 percent in the 12 months ending in March 2013, the Prime Minister’s economic advisory council said today.
The Sensex advanced, tracking regional peers, amid signs the U.S. economy is improving and as Germany signaled its support for a European Central Bank plan to resolve the crisis.
Applications for construction permits in the U.S. rose to the highest since August 2008, a month before the bankruptcy of Lehman Brothers Holdings Inc., signaling stabilization in the housing market that triggered the crisis. German Chancellor Angela Merkel said the ECB’s insistence on conditionality in return for helping cut interest rates for indebted governments matches her priorities.
“Today’s rally is on the back of improved global data,” K.K. Mital, a fund manager at Globe Capital Market Ltd., said by phone from New Delhi. “Liquidity is ample and that’s driving the markets.”
India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index, gained 0.3 percent to 15.73, near the lowest in almost two years. The Nifty index added 0.1 percent to 5,366.30 and its August futures settled at 5,382.35. The BSE-200 Index rose less than 0.1 percent to 2,165.91.
Tata Motors, owner of the world’s cheapest car, the Nano, rose 2 percent to 240.2 rupees. Hindustan Unilever surged 1.8 percent to 503.4 rupees, extending its gains in the past year to 59 percent, the best performance on the Sensex. Infosys Ltd., a software exporter, added 1.5 percent to 2,351.05 rupees.
Jindal Steel plunged 4.1 percent to 401.45 rupees. Tata Power tumbled 4 percent to 97.25 rupees. Reliance Power Ltd. retreated 5.9 percent to 87.65 rupees. Adani Power Ltd. lost 3.2 percent to 42.1 rupees.