Sensex Climbs to Record on India Deficit Outlook, Fund Inflows

India’s benchmark stock index rose to an all-time high after the government beat its $3.1 billion asset-sale target for the current fiscal year and international investors added to their holdings of local shares.

Axis Bank Ltd. increased to its highest level in two weeks after the government sold a part of its holding in the lender. Yes Bank Ltd. was the top performer on the S&P BSE India Bankex Index, which advanced to its highest level since last June. Natural-gas supplier GAIL India Ltd. jumped the most in almost four years.

The S&P BSE Sensex rose 1.4 percent to a record 22,055.48 at the close. The government is set to raise 214 billion rupees ($3.5 billion) selling shares in state companies in the year ending this month, above its 190-billion-rupee target, as it aims to narrow a shortfall in its finances and avoid a credit-rating downgrade to junk. Foreigners have bought a net $2.2 billion of shares this month, the most in Asia, according to data compiled by Bloomberg.

“India’s macros are improving at a pace much faster than what anybody would have anticipated a few months ago,” Navneet Munot, chief investment officer at SBI Funds Management Pvt., a unit of India’s biggest lender that manages $11 billion, said on Bloomberg TV India today. “India looks more appealing on a relative basis” compared with other developing markets, he said.

The Sensex is the best performer this year among the four largest emerging markets including China, Russia and Brazil as improving public finances and cooling inflation boost investor confidence. The gauge’s 4.2 percent gain since Jan. 1 has also come amid speculation national polls starting next month will deliver a government with the mandate to revive economic growth from a decade low.

Stake Sale

Axis Bank increased 1.6 percent to 1,410.70 rupees, the most since March 21. The government raised 55.6 billion rupees from the sale of a 9 percent stake in the lender.

Yes Bank jumped 4.8 percent to 379.2 rupees. ICICI Bank Ltd., India’s second-biggest lender, rallied to its highest level since November 2010.

The finance ministry also raised 40 billion rupees from an exchange-traded fund of state companies, according to Goldman Sachs Asset Management (India) Ltd., which manages the fund.

GAIL surged 4.9 percent, the most on the Sensex. Reliance Industries Ltd., owner of the world’s largest refining complex, increased the most since March 7. Oil & Natural Gas Corp. rose 4.3 percent, helping the S&P BSE India Oil & Gas Index extend this month’s gains to 10 percent.

Fund Inflows

Overseas funds bought a net $701 million of shares over March 21 and 22, data compiled by Bloomberg show. That extended this year’s inflows to $2.6 billion, the highest in Asia. They bought $20 billion last year, the most in Asia after Japan, the data show.

Global investors are snapping up shares as the government predicts the shortfall in the current account will shrink by almost 50 percent and the gap in public finance is set for a six-year low. They also have plowed $5.9 billion into local bonds this year as the pace of consumer-price gains fell to the least in two years, helping the rupee rebound almost 13 percent from a record low in August. The currency climbed 0.2 percent to 60.7875 per dollar, the strongest level in two weeks.

“India stands out in the global context because it is an ironed shirt in the laundry basket,” Andrew Holland, chief executive officer at Ambit Investment Advisors Pvt. in Mumbai, said in an interview to Bloomberg TV India today.

Prime Minister Manmohan Singh’s Congress party is headed for its worst-ever electoral performance as elevated inflation, slowing growth and a series of corruption scandals erode support, opinion polls show. The Bharatiya Janata Party and its allies, favored by investors seeking a rebound in growth, may secure as many as 232 parliament seats, according to a poll released March 6 by the Centre for the Study of Developing Societies. That’s one more from the last survey in January.

The CNX Nifty Index increased 1.4 percent to 6,583.50. The India VIX gained 4.2 percent.

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