Indian stocks rallied the most in a month, led by lenders and industrial companies, as overseas investors added to their holdings of domestic shares for a 28th straight day.
The BSE India Sensitive Index, or Sensex, rose 0.8 percent to 19,417.46, the most since Nov. 30, at the close. Volumes on the gauge were 32 percent lower than the 30-day average. ICICI Bank Ltd., the second-biggest lender, rose the most in a month. Bharti Airtel Ltd., the largest cell-phone operator, jumped to a two-week high. Larsen & Toubro Ltd., the biggest engineering company, gained for the first time in five days.
The Sensex has risen 26 percent this year, headed for its biggest annual jump since 2009, as government steps to open the economy to foreign investment lured offshore funds. Overseas funds were net buyers of domestic stocks for a 28th day on Dec. 24, the longest stretch of net purchases since a record 41-day streak through Oct. 27, 2010, data compiled by Bloomberg show.
“Flows from overseas would be pretty good” in the new year, Sanjay Dutt, a director at Quantum Securities Ltd. in New Delhi, told Bloomberg India TV today. “U.S. elections are out of the way, Europe is sorting itself slowly and a clear signal from India’s central bank is that it is going to focus on growth than on inflation. That means you will see a 50-basis point cut in rates at least by March, if not January.”
Reserve Bank of India Governor Duvvuri Subbarao signaled higher odds of a reduction in interest costs, lifting investor confidence even after he held the benchmark rate on Dec. 18 for a fifth policy meeting. Goldman Sachs Group Inc. said Dec. 19 it sees “high likelihood” of a 50 basis points cut in January.
While the RBI kept the repurchase rate at 8 percent and held the banks’ reserve ratio at 4.25 percent, ebbing in the inflation rate will allow monetary policy to “respond to the threats to growth,” the authority said Dec. 18. RBI’s next policy review is on Jan. 29.
ICICI Bank rallied 2.4 percent to 1,148.65 rupees. State Bank of India Ltd. increased 1.7 percent to 2,370.85 rupees. Drugmaker Sun Pharmaceutical Industries Ltd. added 1.7 percent to 753.7 rupees, while Bharti Airtel advanced 2.9 percent to 317.4 rupees. Larsen jumped 2.3 percent to 1,622.35 rupees. Bharat Heavy Electricals Ltd., the biggest power-equipment maker, increased 1.1 percent to 230.2 rupees.
The S&P CNX Nifty Index on the National Stock Exchange of India rose 0.9 percent to 5,905.60. The BSE Mid-Cap Index added 0.7 percent, the most since Dec. 10. India VIX, which gauges the cost of protection against losses in the Nifty, tumbled 2.7 percent to 14.10, data compiled by Bloomberg show.
The markets were closed yesterday for Christmas.
Credit Analysis & Research Ltd., a rating agency, surged 23 percent in its trading debut. The stock closed at 922.55 rupees, compared with the sale price of 750 rupees. Care, as the company is known, raised 5.4 billion rupees selling 7.2 million shares this month, making it the third rating agency in the country to go public.
Crisil Ltd., an Indian unit of Standard & Poor’s, closed little changed at 1,039.85 rupees, and ICRA Ltd., a local unit of Moody’s Investor Service, dropped 1.6 percent to 1,453.45. Neither of the three stocks are part of the Sensex
The MSCI Asia Pacific Index climbed 13 percent this year as of yesterday as U.S. and Chinese economies showed signs of recovery and central banks around the world took action to shore up growth. The Asian equities benchmark is trading less than 1 percent from its highest close for the year.
Indian Prime Minister Manmohan Singh began a campaign in September to revive economic growth from the weakest levels since 2009 by reducing fuel subsidies and opening up retailing and aviation to foreign investment. The passing of a banking bill on Dec. 18 was the latest in the series of such measures, which have accelerated foreign inflows.
Overseas funds have plowed a net $24.1 billion into local stocks this year, the highest among 10 Asian markets tracked by Bloomberg, excluding China. They bought a net $719.5 million of on Dec. 24, the most since the $776 million purchased on Oct. 5.
The rally has pushed up Sensex’s valuation to 15.3 times estimated earnings, near the highest level since March, data compiled by Bloomberg show. The MSCI Emerging Markets Index is valued at 12 times, the data show.