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Indian Stocks Climb to One-Month High on Earnings, Rupee Rebound

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Nov. 6 (Bloomberg) -- India’s benchmark stock index climbed to the highest level in a month after better-than-expected earnings and a rebound in the domestic currency from a seven-week low lifted investor sentiment.

The BSE India Sensitive Index, or Sensex, rose 0.3 percent to 18,817.38, the highest close since Oct. 5. The gauge gained in the last hour of trade tracking a recovery in the rupee from its lowest level since Sept. 14. Drugmaker Cipla Ltd. climbed to a record after reporting its highest quarterly profit after trading ended yesterday.

“Earnings have been pretty positive, with expansion in gross margins being the key feature,” Sandip Sabharwal, chief executive officer of portfolio management at broker Prabhudas Lilladher, said by phone. “The dollar index lost some weight in the last hour of trade, helping the upmove in the market.”

The Sensex has increased 22 percent this year, driven by foreign fund purchases and government policy reforms announced since mid-September to revive economic growth. A drop in prices of global commodities has helped earnings at local companies by reducing raw-material costs, Chokkalingam G, chief investment officer at Centrum Broking in Mumbai, told Bloomberg TV India.

Out of the 22 Sensex companies that have reported earnings for the September quarter, five, or 23 percent, have trailed analysts’ estimates. That compares with 40 percent of the index companies missing forecasts in the June quarter, data compiled by Bloomberg show. The Standard & Poor’s GSCI Index of 24 raw materials is bound for its first annual loss in four years amid a slowdown in global economic growth.

‘Best Earnings’

“Corporate earnings so far have been the best in the last three to four quarters,” said Chokkalingam. “Commodity prices have fallen in the past month. That is a positive as it reduces demand for dollars, which is good for the rupee.”

The rupee added 0.3 percent to 54.4350 per dollar, data compiled by Bloomberg show, rebounding from 54.7750 earlier. A stronger rupee helps cool consumer prices by lowering the cost of imported commodities, including oil, steel, natural rubber and edible oils. India’s benchmark inflation rate reached a 10-month high in September, government data show.

Cipla rallied 4.4 percent to 396.85 rupees, its highest close on record. The third-largest drugmaker by value reported its highest quarterly profit after trading ended yesterday and said it received regulatory approval to export to the U.S. from its second-biggest plant.

State Bank of India added 1.3 percent to 2,173.15 rupees. Housing Development Finance Corp., the biggest mortgage lender, rose 1.8 percent to 783.75 rupees and HDFC Bank Ltd. gained 0.7 percent to 639.55 rupees.

Beating Estimates

State-run Central Bank of India rallied 4 percent to 72.9 rupees after second-quarter profit climbed 35 percent to 3.3 billion rupees, beating estimates. Amara Raja Batteries Ltd. soared 16 percent to 258.25 rupees, a record, after its second-quarter profit jumped 35 percent to 701 million rupees. The two companies aren’t members of the Sensex.

Foreigners have bought a net $18.4 billion of local shares so far this year, the most among 10 Asian markets tracked by Bloomberg, excluding China. The Sensex is valued at 15 times estimated profits, about 30 percent more than the MSCI Emerging Markets Index’s multiple of 11.5 times. The 30-day volatility in the Indian gauge was at 10.6, near the year’s lowest reading of 10.04 set on Sept. 11, data compiled by Bloomberg show.

The S&P CNX Nifty Index added 0.4 percent to 5,724.40. India VIX, which gauges the cost of protection against losses in the Nifty, jumped 4 percent to 15.21. The National Stock Exchange and the BSE traded 681 million shares yesterday, compared with a 12-month daily average of 912 million.

Hindalco Industries Ltd., India’s second-largest aluminum maker, declined 1.8 percent to 112.45 rupees after reporting a 29 percent drop in second quarter profit. Net income, excluding unit Novelis Inc., declined to 3.59 billion rupees in the three months ended September from 5.03 billion rupees a year earlier, the company said in a filing. The median profit estimate of 29 analysts polled by Bloomberg was 3.72 billion rupees.

To contact the reporters on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net; 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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