Indian stocks held at a two-week high as some investors avoided taking fresh bets before next week’s budget. Reliance Industries Ltd. rallied the most in a month, while Tata Consultancy Services Ltd. surged to a record.
About three stocks fell for every two that climbed on the 30-member S&P Dow Jones Sensex Index, which rose less than 0.1 percent to 19,642.75, the highest level since Feb. 5. Reliance, the owner of the world’s largest refining complex, jumped 3.1 percent, the top performer on the gauge. Tata Consultancy, the nation’s largest software maker, advanced 0.6 percent.
The government will present its annual spending plan on Feb. 28. India cut its borrowing program, canceling on Feb. 18 a $2.2 billion bond sale due on Feb. 22, as Finance Minister Palaniappan Chidambaram curbed spending and raised $4 billion selling stakes in state companies to pare a record deficit. The moves are part of a wider policy overhaul since mid-September to revive an economy growing at the slowest pace in a decade.
“The government woke up last year and instituted a number of reforms and investors are looking for a continuation of that determination,” Geoffrey Lewis, global market strategist at JPMorgan Asset Management in Hong Kong, said in an interview to Bloomberg TV India today. “In a sense, that is more important than the actual measures that are announced in the budget. We are looking for an absence of populist measures ahead of the elections” in 2014, he said.
Overseas funds have been net buyers of local equities for every day this year, purchasing a total of $7.92 billion worth of stocks, a record for the period, data compiled by Bloomberg show. They bought $24.5 billion of stocks last year, the most among 10 Asian markets tracked by Bloomberg, excluding China.
Chidambaram is under pressure to limit spending and keep his pledge to reduce the deficit to 3 percent of gross domestic product in four years, from a targeted 5.3 percent for this fiscal year ending March 31. Officials are trying to avert a credit-rating cut after Standard & Poor’s and Fitch Ratings said last year that they may demote India to junk, citing a budget shortfall and record current-account gap.
The government plans gross market borrowing of about 6 trillion rupees ($111 billion) in the year through March 2014, a record high, according to three Finance Ministry officials with direct knowledge of preliminary estimates. The increase from 2012-2013’s level will provide funds for government spending and debt repurchases as existing sovereign bonds near maturity, the officials said, asking not to be identified as the details aren’t public.
Reliance jumped 3.1 percent to 874.8 rupees, the steepest gain since Jan. 17. BP Plc and Reliance, partners in India’s biggest natural-gas deposit, plan to spend more than $5 billion developing the area off the country’s eastern coast to restore flagging output. Tata Consultancy rose 0.6 percent to 1,452.80 rupees, the highest price since its debut in August 2004. HDFC Bank Ltd., the biggest lender by value, added 0.3 percent to 676.95 rupees, a one-month high.
ICICI Bank Ltd., the third-biggest lender by value, lost 0.9 percent to 1,121.55 rupees, a two-month low. Tata Motors, the owner of Jaguar Land Rover, fell for the first time in four days, losing 0.9 percent to 303.95 rupees. Drugmaker Cipla Ltd. lost 1.6 percent to 381.6 rupees.
The Sensex is valued at 13.9 times projected 12-month profits, data compiled by Bloomberg show. That compares with the MSCI Emerging Markets Index’s 10.3 times. Profits at 43 percent of the Sensex companies missed estimates in the three months ended December, compared with 40 percent in the previous two quarters, data compiled by Bloomberg show.
Earnings-per-share for the Sensex companies in the year to March 31, 2014, will probably be 1,320 rupees, 2 percent below previous estimates, Sanjeev Prasad, senior executive director at Kotak Institutional Equities, said in an interview yesterday in Mumbai. Profits grew 7.5 percent in the December quarter, missing an 11 percent projection, he said.
“We may have reached a bottom but I’m not sure whether we will see a recovery any time soon,” Prasad said. “Underlying trends in volume, margin, profitability and banking sector non-performing loans are very disappointing. Earnings downgrades are still taking place.”
The CNX Nifty Index of the National Stock Exchange gained 0.1 percent to 5,943.05. India VIX, which measures the cost of protection against declines in the Nifty, fell 1.3 percent to 15.60, the lowest since Feb. 15.