Indian stock advanced for a second day amid optimism the government’s plan to sell its holdings in Hindustan Zinc Ltd. and Axis Bank Ltd. will help cut the budget deficit and reduce the chances of a credit-rating downgrade.
Hindustan Zinc jumped to a one-month high after the government said will sell its $2.7 billion stake to billionaire Anil Agarwal. Sesa Sterlite Ltd., which owns 65 percent of the zinc producer, rallied for a fifth day. Axis Bank surged the most in six weeks after the government shortlisted investment banks to help sell its stake in the lender.
The S&P BSE Sensex increased 0.2 percent to 21,251.12 at the close. The money from the sales will help Prime Minister Manmohan Singh pare the budget deficit to a six-year low of 4.8 percent of gross domestic product. All six Sensex companies that have reported earnings so far have beaten or matched analyst estimates.
“The stake sale is another sentiment booster for the markets,” said Sajiv Dhawan, managing director of New Delhi-based JV Capital Services Pvt. “Earnings have been good and inflation is coming under control. The Reserve Bank of India is unlikely to hike rates next week,” he said in an interview to Bloomberg TV India today.
Increases in wholesale prices eased to 6.16 percent in December from a year earlier, government data showed last week, from a 14-month high of 7.52 percent in November. Consumer prices climbed 9.87 percent, the least in three months, a separate report showed. Governor Raghuram Rajan raised borrowing cost twice since September to counter inflation before leaving the repurchase rate at 7.75 percent at the last review on Dec. 18. It next reviews policy Jan. 28.
Hindustan Zinc increased 1.4 percent to its highest level since Dec. 20. Sesa Sterlite climbed 1.6 percent to 208.75 rupees, the highest level since March 14. Bank of America Merrill Lynch raised its price target for Sesa to 215 rupees, according to a note today. Tata Steel Ltd. added 2.4 percent to 383.60 rupees. The stock surged 56 percent in the final three months of 2013. The S&P BSE Metal index rose 0.8 percent to its highest level since Jan. 2.
Axis Bank rallied 2.2 percent, the most since Dec. 6. Citigroup Inc. and JPMorgan Chase & Co. are among banks shortlisted to help the government sell part of its stake in the lender, four people with knowledge of the matter said.
JM Financial Ltd. was also among the investment banks that may be hired to manage the share sale of India’s third-largest non-government-owned lender by assets, said the people, asking not to be identified before a public announcement.
The government will sell about half of its 20.7 percent stake in the bank, the people said. Singh’s administration has raised 13 percent of the targeted 400 billion rupees it forecasts by March.
ICICI Bank Ltd., the nation’s second-biggest lender, jumped 3.3 percent, the best performer on the Sensex today. Carmaker Maruti Suzuki India Ltd. closed at its highest level since Jan. 9. Tata Motors Ltd. climbed 3.6 percent, its highest price since Dec. 10. Engineering company Larsen & Toubro Ltd. climbed 1.3, ending two days of drop.
Global investors bought a net $65.4 million of domestic shares yesterday, data from the regulator show. They invested $20 billion last year, the most in Asia after Japan, according to data compiled by Bloomberg. Net purchases in 2012 were $24.6 billion, the data show.
The Sensex has risen 0.4 percent this year. It climbed 9 percent in 2013, the best annual gain among the four-largest emerging markets, and trades at 13.2 times projected 12-month earnings. The MSCI Emerging Markets Index trades at 9.3 times.
The CNX Nifty Index added 0.2 percent to 6,313.80. The India VIX gained 1.3 percent.