Indian equities climbed, with the benchmark index extending a three-week rally, as foreign funds added to their holdings of local stocks.
The S&P BSE Sensex rose 0.5 percent to 19,673.64 at the close in Mumbai, with volumes on the gauge 30 percent below the 30-day average. Reliance Industries Ltd. climbed 2.6 percent, the most since Feb. 20. Software exporter Tata Consultancy Services rallied to its highest level since April 16.
The Sensex has risen for three straight weeks, the longest run of gains since December, as overseas funds stepped-up purchases of local shares amid optimism the Reserve Bank of India would cut interest rates at its May 3 review. While the RBI pared funding costs that day, Governor Duvvuri Subbarao said in an interview to Bloomberg TV India the next day the possibility of further easing is “practically non-existent.”
“The big event is over and all eyes will now be on global cues and liquidity,” Neeraj Deewan, a director at Quantum Securities Pvt., said in an interview with Bloomberg TV India. “The liquidity boost from across the world is helping India.”
The Sensex has rebounded 7.9 percent from a seven-month low on April 9. Foreigners bought a net $300 million of local shares on May 2, the biggest single-day inflow since Feb. 7, data compiled by Bloomberg show. That took their net investment in equities this year to $11.6 billion, a record for the period, according to the data.
Reliance climbed to 821.6 rupees, its highest close since March 20. The company may this month secure an approval for a $1.45 billion investment to develop a natural gas find it made several years back in the Cauvery basin block off the Tamil Nadu coast, Press Trust of India reported May 5.
Tata Consultancy jumped 3.4 percent to 1,467.20 rupees, leading other Indian software makers higher after data May 3 showed employment in the U.S., their biggest market, picked up more than forecast in April. Infosys increased 1.4 percent to 2,341.10 rupees, the highest close since April 11. The 10-member S&P BSE Infotech Index jumped 1.9 percent, extending last week’s 4.7 percent rally.
Shares of metal producers contributed to Sensex’s gains today. Aluminum maker Hindalco Industries Ltd. rallied 3.7 percent to 101.7 rupees, its highest close since March 6. Tata Steel Ltd., India’s biggest maker of the alloy, also climbed 3.7 percent to 322.55 rupees, its steepest jump since Dec. 18.
Gains in gauges comprising shares of smaller companies exceeded the Sensex’s advance. The 249-member S&P BSE Mid-Cap Index jumped 1.2 percent to close at its highest level since March 12. The S&P BSE Small-Cap Index comprising 514 stocks advanced 1 percent to its highest close since March 18.
The European Central Bank reduced borrowing costs to a record-low 0.5 percent last week to fight the euro-region’s recession while the U.S. Federal Reserve said it will keep buying bonds at a monthly pace of $85 billion as, Chairman Ben S. Bernanke presses on with his effort to boost employment.
“Globally, central banks are in monetary easing mode and the system is flush with liquidity and that will keep the flows coming and support our markets,” Manish Sonthalia, who manages $233 million in equities at Motilal Oswal Asset Management Co. in Mumbai, said by phone on May 3.
Subbarao lowered the repurchase rate to 7.25 percent from 7.5 percent on May 3, as predicted by 33 of 40 economists in a Bloomberg News survey. A record current-account deficit and consumer-price inflation above 10 percent are among risks constraining room for further policy easing, the central bank said that day.
India’s gross domestic product may expand 5.7 percent in the fiscal year through March 2014, compared with the baseline projection of 5.5 percent for the previous 12 months, the central bank said. Wholesale inflation will probably be “range-bound” at around 5.5 percent in 2013-2014, it said.
The Sensex has advanced 1.3 percent in 2013 and trades at 13.3 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s 10.5 times. The 50-stock CNX Nifty Index rose 0.5 percent to 5,971.05 while its May futures traded at 5,976. India VIX, which measures the cost of protection against losses in the Nifty, jumped 1.9 percent to 15.84.