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Indian Stocks Rebound From Biggest Loss Since 2009; Metals Soar

Aug. 22 (Bloomberg) -- Indian stocks advanced, with the benchmark index rebounding from its steepest four-day decline since July 2009, as some investors judged the losses excessive.

Tata Steel Ltd. jumped 10 percent, sending a measure of metal companies to its biggest gain in more than four years, after Nomura Holdings Inc. raised its outlook on the industry to overweight from underweight, citing a weak rupee. Sesa Goa Ltd. jumped 13 percent on being added to the benchmark index. Oil & Natural Gas Corp. surged from a nine-month low. Ranbaxy Laboratories Ltd., the largest drugmaker, soared 17 percent.

The S&P BSE Sensex rallied 2.3 percent to 18,312.94 at the close, the best performer among Asian indexes, with volume 64 percent more than the 30-day average. The gauge slid about 8 percent in the past four days, the most since July 2009, amid concern measures to steady the rupee may curb economic growth. The currency touched a record low of 65.56 per dollar after the Federal Reserve minutes showed broad support for stimulus cuts.

The rally “smacks of bottom fishing,” Dipan Mehta, a member of the BSE Ltd. and the National Stock Exchange, told Bloomberg TV India today. “Nothing has changed and the rupee remains under pressure. This is just a technical rebound.”

The four-day slide dragged the Sensex’s 14-day relative strength index to 28.6 yesterday, below the 30 reading that signals the losses in the gauge may be poised to end, data compiled by Bloomberg show.

Metals Surge

Tata Steel rallied 10 percent to 274.1 rupees, the steepest climb since May 20, 2009 and increasing this month’s gains to 27 percent. The stock closed at its lowest level since March 2009 on Aug. 2. Improvements in the global economy and a weak rupee will boost profits at local metalmakers, Nomura analysts led by Prabhat Awasthi wrote in a note. The S&P BSE Metal index soared 8.2 percent, the most since May 2009. The gauge has plunged 30 percent this year.

Copper maker Sterlite Industries (India) Ltd., controlled by billionaire Anil Agarwal, surged 10 percent to 87.3 rupees. Sesa Goa, an iron ore miner, will replace Sterlite Industries in the Sensex after its merger with the latter, the BSE said in a statement yesterday. Sesa jumped 13 percent to 155.8 rupees. Hindustan Zinc Ltd., also controlled by Agarwal, jumped 9.1 percent to 118.05 rupees.

Oil & Natural Gas jumped 7.6 percent to 269.65 rupees, ending a four-day, 13 percent slide. India’s largest explorer will share Reliance Industries Ltd.’s KG-D6 gas basin infrastructure, a move that will save it $700 million, Economic Times reported today. Reliance gained 2.9 percent to 806.1 rupees.

Expatriated Earnings

Tata Consultancy Services Ltd., India’s largest software exporter, climbed 3.6 percent to 1,778.95 rupees. Infosys Ltd. added 2.1 percent to 3,020.2 rupees. Sun Pharmaceutical Industries Ltd. advanced 4.1 percent to 502.2 rupees. Ranbaxy, which gets 79 percent of its sales from abroad, surged 17 percent to 386.2 rupees. Bharti Airtel Ltd., India’s largest mobile-phone operator, rose 4.8 percent to 313 rupees.

The rupee has weakened 15 percent this year, boosting the expatriated earnings of software exporters and drugmakers that receive bulk of their sales from abroad. The S&P BSE IT index has risen 31 percent this year and the gauge of pharmaceutical companies has added 6 percent. The Sensex has lost 5.7 percent in the same period.

The MSCI Asia Pacific Index fell for the sixth day, almost wiping out this year’s gains, after minutes of the Fed’s July meeting showed officials were “comfortable” with Chairman Ben S. Bernanke’s plans to start trimming the $85 billion monthly stimulus. Global funds have pulled $12.2 billion from domestic stocks and bonds since May 22, when Bernanke made his first comments about the possibility of curbing bond purchases. The rupee has depreciated 14 percent in the same period.

‘Rainstorm’

An exodus of cash from India has left the rupee vulnerable to a current-account gap that widened to an unprecedented 4.8 percent of gross domestic product in the year ended March 31, official data show. Asia’s third-largest economy grew at the slowest pace in a decade in the same year.

“Everybody gets wet when you get such a rainstorm,” Nirav Sheth, head of sales, institutional equities at Edelweiss Financial Services Ltd., said in an interview to Bloomberg TV India. “It is difficult to find out what kind of long-lasting impact such a sharp rupee depreciation will have.”

Combined profits for the 30 companies in the Sensex rose 1.4 percent in the quarter ended June, compared with an estimate of 5.8 percent before the earnings season started, Bank of America Corp. analysts Jyotivardhan Jaipuria and Anand Kumar wrote in a report dated Aug. 19.

About 47 percent of Sensex companies that posted earnings for the June quarter missed analyst estimates. That compares with 27 percent for the March quarter, and 43 percent in the three months ended December, data compiled by Bloomberg show.

The CNX Nifty Index on the National Stock Exchange added 2 percent to 5,408.45, rebounding from its lowest level since Sept. 6. India VIX rose 3.5 percent, extending its five-day climb to 55 percent.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

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

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