Indian equities advanced, helping the benchmark index complete a fifth weekly gain, as overseas funds continued record purchases of local shares.
The S&P BSE Sensex added 0.2 percent to 20,286.12 at the close in Mumbai, holding at the highest level since January 2011. The gauge climbed 0.8 percent this week, the longest run of gains since October. ICICI Bank Ltd. rose to a 2 1/2-year high. Engineering company Larsen & Toubro Ltd. climbed to more than a four-month high, leading power-equipment makers higher. Software exporter Infosys Ltd. climbed the most in a week.
The Sensex has rebounded 11 percent since falling to its lowest level in seven months on April 9, as foreign investors extended purchases and slowing inflation and weakening economic growth prompted the central bank to lower interest rates on May 3 for a third time this year. The measure trades at 14 times projected 12-month profits, 22 percent below the reading on Nov. 5, 2010, when the Sensex rose to its lifetime high.
“Overseas funds are pumping in money on expectations that lower inflation will help the RBI reduce interest rates, which in turn will boost corporate profitability,” V.V.L. Sastry, country head of First Call India Equity Pvt., said by phone from Mumbai. “Valuations are not excessive when compared with peak-time multiples.”
Foreigners bought a net $227 million of domestic stocks on May 16, extending this year’s net investment to $13.4 billion, a record for the period and the second-largest among 10 Asian markets tracked by Bloomberg, behind Japan.
ICICI Bank climbed 1.9 percent to 1,230.45 rupees, the highest close since November 2010. Larsen & Toubro added 1.9 percent to 1,623.40 rupees, the highest since Jan. 4. Bharat Heavy Electricals Ltd. surged 4.2 percent to 201.9 rupees, the most since Nov. 30. ABB Ltd. soared 21 percent to 659.4 rupees and Siemens Ltd. surged 9 percent to 620.75 rupees. The BSE Capital Goods Index closed at a three-month high.
“Speculation on import-duty benefits pulled some capital goods stocks higher,” First Call’s Sastry said.
Infosys rose 0.8 percent to 2,351.75 rupees, the steepest advance since May 6.
ITC Ltd. dropped 0.6 percent to 334.9 rupees after Asia’s second-biggest tobacco company by value reported fourth-quarter profit of 19.3 billion rupees ($352 million) compared with the 19 billion-rupee median of estimates compiled by Bloomberg.
Profits at just two of the 17 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.
India’s wholesale-price index rose 4.89 percent in April, the least in 41 months, official data showed this week. That prompted Reserve Bank of India Governor Duvvuri Subbarao to say the data will be factored into decisions at the next policy meeting scheduled for June 17.
The RBI this month cut the repurchase rate to 7.25 percent from 7.5 percent, joining policy makers in Australia, Europe and South Korea in paring funding costs to support growth. India’s economy slowed to a decade-low 5 percent in the year ended on March 31, according to an estimate from the government.
The 50-stock CNX Nifty Index rose 0.3 percent to 6,187.30. India VIX fell 1 percent.