Indian stocks rose amid expectation the government will be able to push economic reforms even as a deadlock continued in parliament over allowing overseas retailers to set up shop here.
The BSE India Sensitive Index, or Sensex, added 0.2 percent to 18,537.01 at the close. The gauge added 1.1 percent last week, ending two weeks of losses. Tata Steel Ltd., the nation’s biggest producer, climbed the most in six weeks after cutting 900 jobs at its U.K. unit. Hindustan Unilever Ltd., the largest home-products maker, climbed for the second day.
Prime Minister Manmohan Singh began a campaign in September to revive India’s economic growth from the weakest since 2009 and avoid a credit-rating downgrade by paring fuel subsidies and opening up retailing and aviation to foreign investment. Both houses of parliament were adjourned today after the government and the main opposition failed to reach an agreement over investment policies.
“We are not becoming negative on the basis of what is happening but are saying okay, things will take a few more months from here,” Samir Arora, founder of Singapore-based hedge fund Helios Capital Management Pte., which focuses its investments on India, told Bloomberg TV India today. “Now that the parliament is on you cannot do very many new things before first resolving what you have proposed. These are the crucial two-three months leading up to the Union budget. What happens in the parliament is important.”
The biggest overhaul of government policy in a decade and increased foreign inflows to domestic equities has driven the Sensex up by 20 percent this year. The measure trades at 15.1 times estimated profit, compared with the MSCI Emerging Markets Index’s 11.4 times, Bloomberg data show. The government will present its annual budget at the end of February.
The Sensex will probably climb 24 percent to a record 23,069 by the end of next year, helped by an expansion in earnings, global liquidity and attractive valuations, Morgan Stanley analysts led by Ridham Desai wrote in a report today.
“We think that earnings growth is likely to improve over the next four to six quarters,” the analysts said. “Therefore the earnings-revisions breadth will also rise and that is good for share prices.”
Profits at companies in the Sensex may expand 10 percent in the year ending March 2013, and by 19 percent in 2014, the analysts said. “In the next earnings season starting early January, we expect revenue growth to stop decelerating and margins to continue expanding,” they wrote.
Earnings for 40 percent of the 30 Sensex companies lagged behind analysts’ estimates for the quarter ended September, the same as for the June quarter, data compiled by Bloomberg show.
The government is “optimistic” it will cut the deficit for the year ending March 31 to 5.3 percent of gross domestic product from the previous year’s 5.8 percent, Finance Minister Palaniappan Chidambaram said in Pune on Nov. 24.
India raised 8 billion ($144 million) rupees selling a 5.58 percent stake in Hindustan Copper Ltd., according to a government statement on Nov. 23.
The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. gained 0.2 percent to 5,635.90 as about three stocks rose for every two that fell on the 50-stock gauge.
India VIX, which measures the cost of protection against losses in the Nifty, decreased 0.1 percent to 14.67, its fifth day of fall. Trading volumes of Nifty shares were 27 percent lower than the 30-day average, data compiled by Bloomberg show.
Tata Steel climbed 1.9 percent to 371.85 rupees. The company will close 12 sites in the U.K. as the steel industry battles overcapacity and slumping demand. Hindalco Industries Ltd., an aluminum producer, rose 1.8 percent to 109.8 rupees.
Hindustan Zinc Ltd., India’s biggest producer of the metal, jumped 5 percent to 137.95 rupees after Press Trust of India said yesterday the government may sell its stake in the company. Sterlite Industries (India) Ltd., the largest copper producer which owns 65 percent of the company, added 2.1 percent to 98.5 rupees. The government holds 29.5 percent stake.
Hindustan Unilever climbed 1.4 percent to 537.4 rupees, its highest since Nov. 1. Wipro Ltd., the third-biggest software services provider, added 2.3 percent to 375.45 rupees.
Jet Airways (India) Ltd. soared 11 percent to 560.85 rupees, extending the 16 percent jump on Nov. 23, after a government official said the nation’s biggest carrier is in talks to sell a stake to Etihad Airways. SpiceJet Ltd., the only listed budget carrier, rallied 13 percent to 44.4 rupees, its steepest climb since July 30, after the official said the company is having similar discussions with AirAsia Bhd.
Overseas investors were buyers of domestic shares for a eighth day on Nov. 23, purchasing a net $91 million of stocks, data from the market regulator show. Foreigners have bought a net $19.2 billion of local shares this year, the most among 10 Asian markets tracked by Bloomberg, excluding China.