Sensex Rises to 5-Week High as Indian Drugmakers Rally

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Indian stocks advanced for a second day, with the benchmark gauge rallying to its highest level in 10 weeks, on signs Greece may be ready to accept some creditors’ proposals to end a standoff over a bailout.

Bharat Heavy Electricals Ltd., India’s biggest power-equipment maker, was the biggest gainer on the S&P BSE Sensex. Axis Bank Ltd. led a rally among the nation’s lenders. Tata Motors Ltd., the owner of Jaguar Land Rover, rose for the second day. Coal India Ltd., the world’s biggest producer of the fuel, jumped to an all-time high

The Sensex rose 0.9 percent to 28,020.87 at the close in Mumbai Wednesday. The Stoxx Europe 600 Index added 1.6 percent in London, while Standard & Poor’s 500 Index futures advanced 0.9 percent. Greek Prime Minister Alexis Tsipras offered to accept proposals from the nation’s creditors, subject to certain conditions, according to a letter dated June 30 to his creditors.

“If there’s going to be an agreement, then we have to put to rest the fears in terms of the referendum,” Gaurang Shah, a vice president at Geojit BNP Paribas Financial Services Ltd., said in an interview with Bloomberg TV India. “It’s quite positive to see the recovery in Indian markets we are witnessing.”

Global stocks fell earlier this week after Tsipras’s surprise call for a July 5 referendum on the terms of any bailout.

Impact

Reserve Bank of India Governor Raghuram Rajan said June 24 that while “any complications in Greece would create a risk-off moment,” India would survive any volatility caused by a failure by Greece to reach a deal with its creditors. The same view is shared by many Indian money managers.

“Greece won’t have a major impact on Indian markets,” said S. Naren, chief investment officer at ICICI Prudential Asset Management Co., India’s second-biggest money manager with $23 billion in assets. “If the market falls due to Greece, then it’s a buying opportunity. We are positive on the cyclical sectors.”

Naren said his funds used the recent correction in the Sensex to increase their holdings. The Sensex is set to close at its highest level since April 17 on Wednesday.

A Bloomberg survey of Indian equity strategists showed the Sensex will rise 13 percent in the second half of 2015. Rakesh Arora, the head of research at Macquarie Capital Securities India Pvt. and the most accurate index forecaster for the past two years, says the gauge will rise 14 percent in the second half of 2015 after a 1 percent gain in the first.

Sensex Predictions

The prediction assumes the India Meteorological Department is wrong in its projection that annual rainfall, on which some 830 million people depend for their livelihood, will be 12 percent below a 50-year average in the current monsoon.

“People who got left out in the rally last year are willing to go into every correction in spite of the fact that the returns have been less than 1 percent in the last six months,” Ajay Srivastava, managing director of Dimensions Consulting Pvt., said in an interview with Bloomberg TV India.

Bharat Heavy Electricals jumped 4 percent to its highest level since March 18. Larsen & Toubro rose for the second day this week. Tata Motors rallied 2.4 percent, the most since June 18.

Axis Bank, Bharti Airtel

Axis Bank soared 3.5 percent, ending four days of decline. ICICI Bank Ltd., the country’s biggest private lender, added 1.4 percent, the most since June 22. State Bank of India Ltd., the nation’s biggest lender, increased 1.9 percent.

Coal India advanced 1 percent to an all-time high. Bharti Airtel Ltd., India’s largest mobile-phone operator, advanced 1.1 percent, taking this year’s rally to 20 percent.

The Sensex sank 0.6 percent in the second quarter, the most since the three months to March 2013. Foreign investors sold a net $105 million of Indian stocks on Monday, June 29, paring this year’s inflows to $6.3 billion, data compiled by Bloomberg show.

The Sensex trades at 15.6 times projected 12-month earnings, compared with the five-year average of 14.3. The MSCI Emerging Markets Index is valued at a multiple of 11.9.

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