India’s benchmark stock-index advanced the most in two weeks after the central bank allowed lenders to sell long-term bonds exempted from reserve requirements to boost funding.
ICICI Bank Ltd., the nation’s second-largest bank by assets, surged the most in two months. A gauge of metal producers rose to a five-week high as Hindalco Industries Ltd. jumped to its highest level in almost three years. Mahindra & Mahindra Ltd., India’s biggest tractor maker, advanced for a third straight day.
The S&P BSE Sensex gained 1.3 percent to 25,549.72 at the close in Mumbai, rising for a second straight day. Banks rallied after the Reserve Bank of India yesterday said that they can sell rupee-denominated bonds with a minimum maturity of seven years that will be free from cash reserve and statutory liquidity ratio requirements, as well as so-called priority sector lending targets.
“The banking sector is a reflection on the overall economy,” Sanjay Dongre, a fund manager at UTI Asset Management Co., which has $13.2 billion in assets, said on Bloomberg TV India today. “The recent measures of the government and the RBI are useful for infrastructure sector and financial institutions.”
The Sensex extended gains after it rebounded yesterday from a five-day, 4.2 percent retreat on speculation central bank Governor Raghuram Rajan may ease monetary policy.
The Sensex currently trades at a valuation of 15.6 times estimated 12-month profit, compared with the MSCI Emerging Markets Index’s multiple of 11.1. The Indian stock gauge has surged 21 percent this year and is the best performer among the world’s 10 biggest markets.
State Bank of India shares surged 2.2 percent, the highest level in a week. ICICI jumped the most in two months. State Bank, ICICI and Axis Bank Ltd. were among the biggest advancers on the Sensex today.
Mahindra & Mahindra Ltd. gained to a one-week high. Hindalco surged 4.4 percent, pacing gains in a gauge of metal companies. The CNX Nifty Index on the National Stock Exchange of India Ltd. rose 1.3 percent.
International investors have poured $11.3 billion into local equities this year, the most in Asia, on expectation Prime Minister Narendra Modi will help spur an economy growing at near the slowest pace in a decade.