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Indian Stocks Climb to 3-Month High as Foreign Inflows Increase

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May 7 (Bloomberg) -- India’s benchmark stock index climbed to its highest level in more than three months as foreign funds extended this year’s record purchases of the nation’s equities.

The S&P BSE Sensex jumped 1.1 percent to 19,888.95, the highest close since Jan. 31. Volume on the gauge was 20 percent below the 30-day average. ITC Ltd., which has businesses varying from cigarettes to hotels, jumped 2.8 percent to a record. ICICI Bank Ltd., the nation’s largest private lender, climbed 1.9 percent, the most in two weeks.

Lower borrowing costs from Europe to the U.S. and Japan have stoked inflows into emerging markets. The European Central Bank reduced rates to a record low last week and the Federal Reserve said it will keep buying $85 billion of bonds a month to stimulate the U.S. economy. Foreign funds bought a net $802 million worth of local shares last week, the most in 12 weeks, data compiled by Bloomberg show. That took their purchases this year to $11.8 billion, a record for the period, the data show.

“The policy stance taken by central banks from Europe to Japan has caused liquidity to gush out to markets around the world,” Jitendra Sriram, director and head of research at HSBC Securities and Capital Markets (India) Pvt. in Mumbai, told Bloomberg TV India today.

ITC contributed the most to gains in the Sensex. The stock jumped the most since June 29 to a record 335.3 rupees. ICICI Bank added 1.9 percent to 1,163.95 rupees in a second day of gains after losing 3.6 percent on May 3. HDFC Bank Ltd., the second-largest private lender, rose 1.9 percent to 688.05 rupees.

Global Liquidity

Foreign funds have been net sellers of Indian equities in just two of the past 13 years, based on data compiled by Bloomberg going back to 2000. They invested a net $24.5 billion last year, the most among 10 Asian markets tracked by Bloomberg, which helped the Sensex climb 26 percent in 2012, its biggest gain in three years.

“Global liquidity has increased further and this huge liquidity is going to last for some time,” Raamdeo Agrawal, joint managing director at Motilal Oswal Financial Services Ltd. in Mumbai, told Bloomberg TV India yesterday.

The Sensex capped a third week of advances on May 3, the longest run since December. The gauge has rebounded 9.1 percent since falling to a seven-month low on April 9, as foreign funds stepped up equity purchases amid optimism the Reserve Bank of India would cut interest rates at its May 3 policy review. While the RBI pared funding costs that day, Governor Duvvuri Subbarao told Bloomberg TV India in a May 4 interview that the possibility of further easing is “practically non-existent.”

Sensex Valuation

The Sensex has advanced 2.4 percent in 2013 and trades at 13.7 times projected 12-month profits, compared with a multiple of 10.6 times for the MSCI Emerging Markets Index. The gauge’s 50-day volatility, a measure of price swings, has risen to the highest level since Aug. 8.

The 50-stock CNX Nifty Index rose 1.2 percent to 6,043.55, its highest close since January 30. Its May futures settled at 6,050.30. India VIX, which measures the cost of protection against losses in Nifty, jumped 4.2 percent to 16.5.

Bharti Airtel Ltd., the largest mobile-phone operator, rallied 3.3 percent to 331.20 rupees, its highest level since Jan. 31. Tata Motors Ltd., owner of British luxury car brands Jaguar and Land Rover, jumped 2.5 percent to 298.4 rupees, the most since April 25. Hero MotoCorp Ltd., the biggest motorcycle maker, climbed 3.5 percent to a two-month high of 1,706.35 rupees.

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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