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India’s Sensex Rises to Seven-Week High as Lenders Rebound

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July 18 (Bloomberg) -- Indian stocks advanced, with the benchmark index closing at a seven-week high, as a gauge of lenders rebounded from a 10-month low and energy stocks rose.

The S&P BSE Sensex increased 0.9 percent to 20,128.41 at close in Mumbai, with bulk of the gains coming in the last hour of trade. HDFC Bank Ltd. jumped 3.2 percent, leading its peers higher. Oil & Natural Gas Corp., the nation’s biggest explorer, surged the most in six months after CLSA Asia Pacific Markets raised its recommendation on the stock to buy.

The 13-stock S&P BSE Bankex lost 7 percent in the past two days after the central bank’s decision on July 15 to raise two interest rates to steady the rupee triggered a selloff in bank shares. The slump dragged the measure’s valuation to 8.8 times yesterday, the cheapest since December 2011, data compiled by Bloomberg show. That compares with record levels for gauges of consumer and healthcare stocks.

“Bank stocks have been beaten down and their valuations are cheaper than other sectors,” B. Gopkumar, executive vice president at Kotak Securities Ltd., said by phone from Mumbai. “Typically, defensives stocks tend to do well in a volatile environment.”

HDFC Bank surged 3.2 percent to 684.1 rupees, the steepest gain since July 11. State Bank of India, the nation’s biggest lender by assets, added 1 percent to 1,824.25 rupees. ICICI Bank Ltd. increased 0.4 percent to 984.43 rupees.

Axis Bank Ltd. jumped 3.7 percent to 1,238.2 rupees. The lender reported net income of 14.1 billion rupees, beating the 13.9 billion rupees median estimate in a Bloomberg survey. The stock is rated buy by 51 out of 71 analysts in the survey, with an average price target of 1,599.64 rupees. That’s a 29 percent gain on the closing price.

CLSA Upgrade

Oil & Natural Gas jumped 4.6 percent to 314.65 rupees, the most since Jan. 18. CLSA upgraded the stock to buy, maintaining its price target of 360 rupees.

Infosys Ltd., the second-largest software exporter, rose for a second day, climbing 1.8 percent to 2,800.75 rupees.

Drugmaker Sun Pharmaceutical Industries Ltd. increased 0.5 percent to 1,118.4 rupees. The stock closed at an all-time high on July 16. Cipla Ltd. added 1.6 percent to 413.3 rupees, the highest close in about two months. Dr Reddy’s Laboratories Ltd. rose 1.2 percent to 2,339.5 rupees. The S&P BSE Healthcare index rose to the highest since the BSE Ltd. began compiling the 17-member gauge in 2000.

Tata Consultancy Services Ltd., India’s largest software exporter by market value, fell 1.1 percent to 1,660.4 rupees before its June-quarter results. Profit rose 16 percent to 38 billion rupees ($637 million), beating the 37.5 billion-rupee median of 40 analysts’ estimates in a Bloomberg News survey. Earnings were announced after the market closed.

Global investors sold $0.7 million of local shares on July 17, the smallest outflow since Feb. 19, data from the regulator show. They have sold a net $982 million of Indian stocks this month, the highest among 10 Asian markets tracked by Bloomberg, extending June’s $1.8 billion sell-off. Foreigners have plowed a net $12.36 billion in local equities this year, the highest in Asia after Japan, data compiled by Bloomberg show.

The CNX Nifty Index on the National Stock Exchange of India Ltd. gained 1.1 percent to 6,038.05. India VIX, which gauges the cost of protection against losses in the Nifty, fell 5.6 percent.

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

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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