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Indian Stocks Advance Most in Week as Rupee Surges, Oil Retreats

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Aug. 29 (Bloomberg) -- Indian stocks advanced the most in a week as the rupee surged the most in 27 years and oil prices declined. Banks and energy companies led the gains.

HDFC Bank Ltd. climbed for the second day, helping the S&P BSE Bankex halt a three-day, 7.5 percent slide. Reliance Industries Ltd., owner of the world’s largest refining complex, increased the most in three months. Sesa Goa Ltd., an iron-ore miner, jumped to a seven-month high, sending a gauge of metal companies to its highest level in more than two months. The Bank of New York Mellon India ADR Index climbed 1.4 percent at 10:49 a.m. in New York, extending a two-day rally to 2.5 percent.

The S&P BSE Sensex jumped 2.3 percent to 18,401.04 at the close. The rupee gained the most since 1986 after the central bank said it will sell dollars to the state oil importers after the currency sank the most in two decades yesterday. The Sensex has slid 5 percent this month, pulling valuations to 7 percent below the five-year average, amid concerns the rupee’s rout and elevated oil prices will hamper government efforts to cool inflation and narrow an unprecedented current-account deficit.

“We are now in a phase of extreme pessimism, which often presents a buying opportunity,” Gary Dugan, chief investment officer for Asia and the Middle East at Coutts & Co., said in an interview on Bloomberg TV India today. “We are very close to the worst point from where we can rebound. We also expect a few policy measures to be announced.”

More Expensive

A weakening currency makes imports more expensive for a country that imports 80 percent of its oil. Brent crude for October settlement slid as much as 1.4 percent to $114.94 a barrel after closing yesterday at the highest since Feb. 19. The rupee surged 3.4 percent to close at 66.595 per dollar. It slumped 3.9 percent to a record 68.845 yesterday.

The currency has still depreciated 17 percent this year, eroding dollar-based investments by 22 percent from Sensex shares, data compiled by Bloomberg show. The Sensex’s valuation has dropped to 13.1 times estimated 12-month earnings, compared with the five-year average of 14.1 times.

HDFC Bank

HDFC Bank climbed 1.8 percent to 572.1 rupees, the most since Aug. 23. The Bankex gained 1.6 percent, the first day of gain in four days. The gauge has slumped 29 percent this year on concern the economic slowdown will increase bad debts in the banking system. Housing Development Finance Corp. surged 6.6 percent to 695.5, ending a two-day, 12 percent slump that was the most since March 2009.

Reliance Industries gained 4.1 percent to 845.25 rupees. Oil & Natural Gas Corp., the largest explorer, advanced 2.1 percent to 248.7 rupees, ending a three-day, 12 percent slide that was the most since November 2008. Gail India Ltd. climbed 2.4 percent to 288.8 rupees, its first gain this week.

Sesa Goa jumped 13.8 percent to 192.45 rupees, the highest close since Jan. 15. Aluminum maker Hindalco Industries Ltd. rallied 4.9 percent to 107.1 rupees, a three-month high. The BSE India Metal index jumped to the highest since June 19.

Reliance Communications

Bharti Airtel Ltd., India’s biggest mobile-phone company, surged 4 percent to 299.4 rupees, ending a four-day, 8 percent slide. Reliance Communications Ltd., the third-largest, jumped 8.9 percent to 121.2, the most since July 31.

Today’s gain in the Sensex came amid expiry of monthly derivative contracts, Anand Tandon, chief executive officer of JRG Securities Ltd., said on Bloomberg TV India. Futures and options contracts expire on last Thursday of every month.

“It has been a weak month, so it is not surprising that expiry is somewhat strong,” he said. “Given the general gloom and doom, it is unlikely the September series will be positive.”

Data tomorrow may show economic expansion slowed to 4.6 percent in the quarter ended June 30, from 4.8 percent in the previous three months, according to the median estimate of 43 analysts in a Bloomberg survey. That would be the slowest pace of expansion since the quarter ended March 2009.

The slowdown and a weak rupee are hurting company profits. About 47 percent of Sensex companies that reported earnings for the June quarter missed analyst estimates, compared with 27 percent for the March quarter, data compiled by Bloomberg show.

Foreign funds sold a net $208.1 million of Indian shares on Aug. 27, a seventh straight day of sales, paring this year’s inflow to $11.6 billion. That’s still the second-highest among 10 Asian markets tracked by Bloomberg.

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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