Indian stocks advanced, with the benchmark index posting its biggest weekly gain in two months, amid speculation banks will benefit from foreign investment and signs bad debts have peaked.
Axis Bank Ltd. rallied 3.1 percent, sending an industry gauge to its largest weekly gain in two months. Larsen & Toubro Ltd. jumped 2 percent, sending a gauge of capital goods shares to a one-month high. HCL Technologies Ltd. climbed to a record after Wall Street Journal reported the company’s founder plans to sell his stake. HCL Corp., which owns the software maker, denied the report in an e-mailed statement.
The S&P BSE Sensex jumped 0.8 percent to 20,700.75 at the close, climbing 1.6 percent this week. Buyout firm KKR & Co. said yesterday it plans to invest in domestic banks, boosting investor sentiment toward the industry after stressed loans in Asia’s third-largest economy reached a decade high as of Sept. 30. The S&P BSE Bankex has a price-to-book ratio of 1.5, versus its 10-year average of 2.1. It fell 9.9 percent last month.
“Financial stocks are value buys at these levels after the selloff,” Nilesh Karani, vice president at Magnum Equity Broking Ltd., said by telephone from Mumbai. “Bad loans have peaked and we expect improvement in next two quarters to boost profits. KKR buying bad assets will lift overall sentiment.”
Axis Bank advanced the most in the S&P BSE Bankex, which rose 1.2 percent. ICICI Bank added 1.7 percent, the first gain in three days. State Bank of India added 1.5 percent.
Stressed assets, which include bad debts and restructured loans, rose to 10.2 percent of total debt at local banks as of Sept. 30, data compiled by the Reserve Bank of India show.
KKR, which has raised $2 billion for a global fund that will provide financing to distressed firms, may also consider buying a pool of bad loans from Indian banks, KKR’s Co-Chairman Henry R. Kravis told reporters in Mumbai yesterday.
“The banking sector cannot be ignored for long,” P. Phani Sekhar, a fund manager at Angel Broking Ltd., said in an interview to Bloomberg TV India today. “You will always have investors who are interested in buying on declines.”
Larsen & Toubro climbed to 1,055.15 rupees, the highest close since Jan. 1. The S&P BSE Capital Goods Index gained for a sixth day, the longest run of gains in two months.
HCL Technologies increased 4.4 percent to 1,538.2 rupees. Billionaire founder Shiv Nadar controls 62 percent of the company, a stake worth about $11 billion at today’s closing price.
Shree Renuka Sugars Ltd. tumbled the most in three months after the company said it would sell a 27.5 percent stake to Singapore-based Wilmar International Ltd. Wilmar will buy the new shares at 20.08 rupees apiece, according to a filing after markets closed yesterday. Wilmar and Shree Renuka’s controlling holders will then offer to buy an additional 26 percent of the expanded share capital at 21.89 rupees apiece, less than the stock’s closing price of 22.4 rupees yesterday.
The Sensex has retreated 2.2 percent this year and trades at 13.3 times its 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 10.1 times. The CNX Nifty Index added 1.1 percent to 6,155.45.
Foreign funds bought a net $35.1 million of local shares on Feb. 20, paring this year’s outflows to $5.6 million, data compiled by Bloomberg show. International investors bought $20 billion last year, the most in Asia after Japan.