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Indian Stocks Advance Most in Asia, Led by Software Exporters

March 7 (Bloomberg) -- Indian stocks advanced the most in the region, led by a rally in software exporters amid optimism central banks in the U.S. and Europe, their biggest markets, will continue stimulus measures to revive economic growth.

The S&P BSE Sensex increased 0.8 percent to 19,413.54, its highest close since Feb. 20. Tata Consultancy Services, India’s largest software maker, rose 1.8 percent to a record and rival Infosys Ltd. added 1.2 percent. HDFC Bank Ltd., the nation’s second-largest private lender, climbed the most since November.

The European Central Bank will keep its benchmark interest rate unchanged at a record low of 0.75 percent today, according to 56 of 61 economists surveyed by Bloomberg. The U.S. economy grew at a modest pace amid rising demand for homes and autos, the Federal Reserve said in its Beige Book report. India’s top software exporters get most of their revenue from the U.S. and Europe, data compiled by Bloomberg show.

“A recovery in the Western world certainly augurs well for technology exporters,” Aneesh Srivastava, who oversees $531 million as chief investment officer at IDBI Federal Life Insurance Co. in Mumbai, said by phone today. “The European Central Bank is widely expected to hold rates.”

The Bank of England left its four-year-old bond-purchase program unchanged today as policy makers debate more radical measures to aid the recovery. The decision came after Indian markets closed. The Dow Jones Industrial Average rose to a record on March 5 as the U.S. service industry expanded at the fastest pace in a year.

Tata Consultancy climbed for a fourth day to a record 1,589.90 rupees. Infosys added 1.2 percent to 3,004.35 rupees, the highest close since April 2011. Wipro Ltd. rose 1.7 percent to 449.35 rupees, a 13-month high. The three software exporters have a combined 16 percent weighting on the Sensex, data compiled by Bloomberg show.

Stock Upgrades

HDFC Bank climbed 1.8 percent to 641.80 rupees, the most since Nov. 29. The stock was raised to buy at Kotak Securities Ltd.’s Private Client Research group.

Larsen & Toubro Ltd., the biggest engineering firm, rose 2.2 percent to 1,463.80 rupees, its biggest three-day increase since September. CLSA Asia-Pacific Markets upgraded the stock to buy from outperform, following similar actions from Goldman Sachs Group Inc., Nomura Holdings Inc. and Jefferies India Pvt.

Motorcycle maker Hero MotoCorp Ltd. climbed 4 percent to 1,713.65 rupees, the most in nine months. Cigarette maker ITC Ltd. added 1.9 percent to 292.35 rupees.

The Sensex changed directions at least 15 times before rallying in the last hour of session, a spurt some investors said was caused by traders closing out bearish bets.

‘Short Covering’

“It would seem that there was some short-covering after the weakness we saw in the past few weeks,” David Pezarkar, head of equities at Daiwa Asset Management (India) Pvt. in Mumbai, said by phone.

The Sensex fell for five straight weeks through March 1, reaching a three-month low on Feb. 28, as profits at companies from Tata Motors to State Bank of India missed estimates for the December quarter and after a government report showed the economy grew 4.5 percent from a year earlier in the final three months of 2012, the weakest pace in almost four years.

Weak economic data may prompt the Reserve Bank of India to reduce borrowing costs at its March 19 review, Abhay Laijawala, head of research at Deutsche Equities India Pvt., said on March 4. The RBI pared the repurchase rate by 25 basis points to 7.75 percent on Jan. 29, the first cut in nine months. The rate is still the highest among major Asian nations.

‘Positive Surprise’

“The market expects a 25-basis point cut,” Madhusudan Kela, chief investment strategist at Reliance Capital Ltd. in Mumbai, said in an interview to Bloomberg TV India yesterday. “Anything more will be a positive surprise.”

Overseas investors bought a net $119 million of domestic shares on March 6, taking purchases this year to a net $8.6 billion, a record for the period, data compiled by Bloomberg show. They bought a net $24.5 billion worth of shares in 2012, the most among 10 Asian markets tracked by Bloomberg.

The Sensex’s valuation has narrowed to 13.7 times projected 12-month profits from 14.3 times on Jan. 25, when it reached a two-year high, data compiled by Bloomberg show. The MSCI Emerging Markets Index trades at 10.3 times.

The CNX Nifty Index of the National Stock Exchange of India Ltd. rose 0.8 percent to 5,863.30, while its March futures settled at 5,889.40. India VIX, which measures the cost of protection against losses in the Nifty, slumped 2.5 to 13.07.

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

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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