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Indian Stocks Climb to Two-Year High as Foreigners Lift Holdings

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May 16 (Bloomberg) -- India’s benchmark stock index rose to the highest in more than two years as foreign funds added to their holdings of local shares.

The S&P BSE Sensex added 0.2 percent to 20,247.33, its highest level since Jan. 5, 2011. ICICI Bank Ltd., the nation’s biggest private lender, gained to a 3 1/2 month high. Reliance Industries Ltd., owner of the world’s largest refining complex, increased to a two-month high.

Overseas funds bought local stocks for a 19th day, the longest streak of purchases since February, taking this year’s net inflows to $13.1 billion. That’s a record for the period, data compiled by Bloomberg show. The Sensex surged 2.5 percent yesterday amid speculation the central bank may reduce lenders’ reserve-requirement ratios after data May 14 showed inflation slowed to a more than three-year low.

“Flows are coming in on expectation of a lower interest rate regime as inflation dips,” Debasish Mallick, chief executive officer at Mumbai-based IDBI Asset Management Ltd., which has $1.1 billion in assets, said in a phone interview today. “The easy money policy of global central banks will support inflows into India.”

The Reserve Bank of India this month cut the repurchase rate to 7.25 percent from 7.5 percent, joining policy makers in Australia, Europe and South Korea in trimming funding costs to support growth. India’s economy expanded 5 percent in the year ended March 31, the least since 2003, according to an estimate from the government.

Lenders Rally

ICICI Bank increased 1.4 percent to 1,207.50 rupees, the highest close since Jan. 30. State Bank of India climbed 1.5 percent to 2,419.35 rupees, the highest since January 31.

HDFC Bank Ltd. added 1.1 percent to close at 722.8 rupees, a lifetime high. The S&P BSE India Bankex climbed for a third day to the highest level since 2002 when BSE Ltd. began compiling the index of 14 lenders.

Reliance, which has the second-highest weighting in the Sensex, gained 2.6 percent to 840.65 rupees, the highest close since March 15. Oil & Natural Gas Corp., the nation’s largest explorer, gained 0.9 percent to 337.9 rupees, the highest price since Jan. 31.

The Sensex has advanced 11 percent since declining to a seven-month low on April 9 as foreigners extended purchases of local stocks amid monetary easing by global central banks. The gauge trades at 13.9 times forecast 12-month profits, the most expensive since October, compared with the MSCI Emerging Markets Index’s 10.6 times.

Earnings Scorecard

Motorcycle producer Bajaj Auto Ltd. lost 0.9 percent to 1,806.5 rupees after fourth-quarter net sales of 46.5 billion rupees was lower than the estimate of 45.2 billion rupees, according to 42 analysts in a Bloomberg survey.

Profits at just two of the 15 Sensex companies that have reported March-quarter earnings have trailed estimates, data compiled by Bloomberg show. That compares with about 43 percent that missed forecasts in the three months ended Dec. 31, and 40 percent in the previous two quarters.

Apollo Hospitals Enterprise Ltd. and GlaxoSmithKline Consumer Healthcare Ltd. soared 8 percent each, while Oil India Ltd. and Wockhardt Ltd. added more than 1 percent. The stocks, which are not part of the Sensex, will be added to the MSCI India Index from June 1.

The 50-stock CNX Nifty Index rose 0.4 percent to 6,169.90. India VIX fell 2.2 percent.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

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

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