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India’s Sensex Climbs to 3-Week High on Budget-Deficit Optimism

Feb. 18 (Bloomberg) -- India’s benchmark equities index climbed to a three-week high amid optimism the government’s pledge to narrow the fiscal gap to the lowest in seven years and duty-cut proposals will revive economic growth.

Axis Bank Ltd. jumped the most in three months, helping a gauge of lenders to its steepest gain in five weeks. Mortgage lender Housing Development Finance Corp. rallied the most in two months. Engineering company Larsen & Toubro Ltd. advanced to a one-month high.

The S&P BSE Sensex increased 0.8 percent to 20,634.21, the highest close since Jan. 29. The fiscal gap will narrow to 4.1 percent of gross domestic product by March 31, 2015, Finance Minister Palaniappan Chidambaram said yesterday, while unveiling an interim budget before polls due by May. He also pared taxes for cars and consumer goods to stoke demand in an economy set to recover from a decade-low pace.

“GDP growth has troughed, the rupee has stabilized and current-account deficit has been pared,” Abhay Laijawala, head of research at Deutsche Equities India, said in an interview to Bloomberg TV India today. “The economy is looking better than it was in the past three to four years. This year may be the beginning of a bull market in India.” The Sensex may climb to 24,000 by end of 2014, he said.

Axis Bank surged 4.5 percent, the most since Nov. 14, and the best performer on the Sensex. State Bank of India rebounded from its lowest price since May 2009. ICICI Bank Ltd. jumped 2.8 percent to a one-month high. Housing Development rallied 3.2 percent, the steepest climb since Dec. 20.

Tata Steel added 1.5 percent, the biggest gain since Feb. 11. Larsen increased 1.9 percent to its highest since Jan. 23.

Car Sales

Tata Motors Ltd., owner of Jaguar Land Rover, gained 1.2 percent to a two-month high. Carmaker Maruti Suzuki India Ltd. gained 2.6 percent, a third day of increase.

Chidambaram yesterday proposed to cut the excise duty on small cars to 8 percent from 12 percent, and the tax on SUVs to 24 percent from 30 percent. Local sales of passenger vehicles fell 5.7 percent in the nine months ended December, set for the biggest annual drop in a decade. He also cut the duty for DVD players, washing machines and microwave ovens.

“In an election year the finance minister desisted from any populist giveaways and that is a strong sign,” Deutsche’s Laijawala said.

Overseas funds bought a net $3.3 million of Indian shares on Feb. 14, paring the year’s outflows to $238 million, data compiled by Bloomberg show. They bought $20 billion last year, the most in Asia after Japan, data show.

Equities Rebound

Global stocks erased their losses for the year as growing confidence in the U.S. economy and a rally in emerging markets restored $3 trillion of value. Stocks have rebounded from the worst start to a year since 2010 after American unemployment fell to the lowest level since 2008, Chinese trade increased and developing nations took steps to stem capital outflows.

Equity funds tracked by EPFR Global and Citigroup Inc. lured more than $11 billion in the week to Feb. 12, led by the U.S. as Federal Reserve Chair Janet Yellen said economic growth has picked up and pledged to cut stimulus in “measured steps.”

The Sensex has retreated 2.5 percent this year and trades at 13.4 times projected 12-month earnings, compared with the average multiple of 14.4 over the past five years. The MSCI Emerging Markets Index is valued at 9.3 times.

The CNX Nifty Index on the National Stock Exchange of India Ltd. climbed 0.9 percent to 6,127.10. The India VIX fell 2.7 percent.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at

To contact the editor responsible for this story: Michael Patterson at

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