Indian stocks climbed to a 19-month high on optimism the government will extend an economic-policy overhaul to bolster investment after growth slowed last quarter to match a three-year low.
The BSE India Sensitive Index, or Sensex, rose 0.9 percent to 19,339.90 at the close, taking this month’s advance to 4.5 percent. Volumes on the measure were almost triple the 30-day average, data compiled by Bloomberg show. Housing Development Finance Corp., the biggest mortgage lender, extended gains from a record. Bharat Heavy Electricals Ltd. and Jindal Steel & Power Ltd. jumped more than 5 percent each.
Data today showed gross domestic product grew 5.3 percent in the three months to Sept. 30 from a year ago, in line with the median of 42 estimates in a Bloomberg survey and down from 5.5 percent in the previous quarter. The government yesterday agreed to opposition demands for a vote on its plan to allow overseas companies to set up supermarkets, paving way for the functioning of parliament after four days of adjournments.
“The market is playing for the next fiscal year and the measures the government is trying to push will bear fruit going forward,” said Shishir Bajpai, senior vice president at IIFL Wealth Management Ltd. in Mumbai. “There is intent from the government on economic reforms.” IIFL has $1.8 billion in stocks under management and advisory.
Foreign Fund Purchases
The Sensex has increased 25 percent this year, driven by foreign flows and economic policy measures. Offshore investors bought $360 million more local stocks than they sold yesterday, the most in two months, taking monthly inflows to $1.7 billion, exchange data show. They have purchased a net $19.8 billion of shares this year, the highest among 10 Asian markets tracked by Bloomberg, excluding China, the data show.
The flows propelled the local currency to its first weekly gain since October. The rupee advanced 2.3 percent this week to 54.2650 per dollar, paring its loss in November to 0.8 percent.
Housing Development Finance, the biggest mortgage lender, soared 2.6 percent to 843.50 rupees. ICICI Bank Ltd., the No.3 lender by value, added 1.7 percent to 1,099.85 rupees. State Bank of India, the second-largest by market value, added 1.8 percent to 2,170.3 rupees. The 14-member Bankex index increased 1.5 percent to its highest level since December 2010.
“If the economy improves then the stress on their balance sheets comes down,” IIFL’s Bajpai said. “Banks’ earnings will further improve if non-performing assets come down.”
Sterlite Industries (India) Ltd., the biggest copper and zinc producer, surged 3 percent to 108.55 rupees, extending this week’s rally to 12.5 percent, the best performer among the 30 Sensex stocks. Aluminum maker Hindalco Industries Ltd. rose 3.1 percent to 116.6 rupees. Tata Steel Ltd., the largest producer of the alloy, gained 2.5 percent to 386.2 rupees.
Bharat Heavy, the biggest power-equipment maker, jumped 5.5 percent to 234.35 rupees, its steepest climb since Oct. 4. Jindal Steel rallied 5.8 percent to 403.05 rupees. Oil & Natural Gas Corp., the largest state-owned oil explorer, soared 4.4 percent to 264.95 rupees, erasing this year’s loss.
The Sensex is the second-best performer since Jan. 1 among global benchmark gauges with at least $1 trillion in market value, data compiled by Bloomberg show. The measure has fallen in December only once in the past nine years, the data show.
“The momentum is with the market and there are a lot of tailwinds like reform expectations and foreign inflows,” Dilip Bhat, joint managing director of Prabhudas Lilladher Pvt., told Bloomberg TV India today.
Prime Minister Manmohan Singh’s government, striving to avert a credit-rating downgrade, snapped months of paralysis in September by curbing fuel subsidies and giving retailers such as Wal-Mart Stores Inc. the chance to set up stores.
Opposition led by the Bharatiya Janata Party accused the government of reneging on a promise to win legislative support for the retail policy. Singh’s administration gave ground after talks with allies and regional parties that have signaled they are unlikely to vote against the ruling bloc.
Moody’s Investors Service maintained its stable outlook on India’s investment-grade credit rating and Goldman Sachs Group Inc. yesterday raised local shares to overweight.
The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. added 0.9 percent to 5,879.85. The 50-stock measure will reach 6,600 by December next year, Goldman said, joining Morgan Stanley and JPMorgan Chase & Co. in predicting a positive outlook for Indian equities for 2013.
The Sensex may rally to 23,069 by December 2013, Morgan Stanley analysts led by Ridham Desai wrote in a Nov. 26 report. JPMorgan said Nov. 19 that Indian stocks are its top selection among the so-called BRIC nations next year.
The Sensex is valued at 15.8 times estimated earnings, compared with the MSCI Emerging Markets Index’s 11.7 times, according to data compiled by Bloomberg.