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India’s Sensex Index Posts Biggest Weekly Gain Since November

India’s benchmark stock index rose, capping its biggest weekly advance since November, as data from the U.S. added to signs the global economy is recovering and on optimism the Indian central bank would cut rates this month.

The S&P BSE Sensex added 1.4 percent to 19,683.23, its highest close since Feb. 4. The gauge increased 4 percent this week. Jindal Steel & Power Ltd. surged 5.7 percent, the most since Nov. 30. Housing Development Finance Corp. jumped 4 percent, the most since May 24.

Stocks climbed this week on expectations global central banks will continue with stimulus measures, spurring inflows into emerging markets. Yesterday, the European Central Bank held rates at a record low, the Bank of England left its four-year-old bond-purchase program unchanged and data showed that jobless claims in the U.S. fell. Foreigners have bought $8.7 billion worth of Indian shares this year, a record for the period, data compiled by Bloomberg show.

“Flows will continue to be strong for Indian equities,” Harsha Upadhyaya, head of equities at Kotak Mahindra Mutual Fund, told Bloomberg TV India. Local “investors are building in the possibility of gradual interest-rate cuts,” he said.

The Reserve Bank of India meets for its next policy review on March 19. The authority cut its benchmark rate by 25 basis points to 7.75 percent on Jan. 29, the first reduction in nine months. That’s still the highest among major Asian nations.

Jindal Steel rallied 5.7 percent to 367.20 rupees, the top gainer on the Sensex today. The stock plunged 22 percent in the previous two months. HDFC, India’s largest mortgage lender, jumped 4 percent to 813.25 rupees, the most since May 24. It retreated 10 percent in the past three months.

“We are seeing value emerging in certain beaten-down stocks and sectors,” Kotak’s Upadhyaya said.

Global Rally

The Dow Jones Industrial Average increased to a record on March 5 as data this week showed the U.S. service industry grew at the fastest pace in a year. The Stoxx Europe 600 Index rose to its highest level since June 2008 the same day. Asian equities capped a third week of gains today, with the MSCI Asia Pacific Index rising 0.6 percent.

“Positive U.S. data and the Federal Reserve’s recent assurance over monetary policy have led to an increase in investors’ risk appetite,” Nidhi Sarswat, a senior research analyst at Bonanza Portfolio Ltd., wrote in note yesterday.

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 trailed estimates for the December quarter and the pace of the economic growth slowed.

India’s economy expanded 4.5 percent from a year ago in the final three months of 2012, the weakest pace in almost four years, government data showed last week.

‘Positive Surprise’

“The markets expect a 25-basis point cut in rates in the upcoming policy,” Madhusudan Kela, chief investment strategist at Reliance Capital Ltd., told Bloomberg TV India on March 6. “Anything more will be a positive surprise.”

Stocks in the financial and auto sectors, businesses most affected by changes in interest rates, rallied today. HDFC Bank Ltd., India’s second-largest non-state lender, rose 2.4 percent to 657.30 rupees, the most since Nov. 29. ICICI Bank Ltd. and State Bank of India gained 2 percent each to 1,139.30 rupees and 2,209.50 rupees.

Mahindra & Mahindra Ltd., India’s biggest producer of sport-utility vehicles, rose 2.1 percent to 904.20 rupees as workers called off a strike at the company’s Nashik plant yesterday. Motorcycle maker Hero MotoCorp Ltd. climbed 1.7 percent to 1,743.15 in a fourth day of gains. Tata Steel Ltd., the top steelmaker, rose 2.5 percent to 359.15 rupees. The stock sank 20 percent in the previous two months.

The Sensex is valued at 13.9 times projected 12-month profits, compared with 14.3 times on Jan. 25, when the gauge climbed to a two-year high, data compiled by Bloomberg show. That compares with the MSCI Emerging Markets Index’s 10.6 times.

The CNX Nifty Index of the National Stock Exchange of India Ltd. advanced 1.4 percent to 5,945.70 while its March futures settled at 5,968.30. India VIX, which measures the cost of protection against losses in the Nifty, rose 2.1 to 13.34.

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