Indian stocks rallied to a three-month high as lenders climbed after the government said it is considering changes to foreign investment rules. Energy companies gained amid lower crude prices.
Axis Bank Ltd. jumped the most since May, while Yes Bank Ltd. had the steepest climb in three weeks. Kotak Mahindra Bank and HDFC Bank Ltd. rallied to records. Reliance Industries Ltd., owner of the world’s largest refining complex, advanced to its highest since Sept. 9. Tata Power Co. added 2.4 percent.
The S&P BSE Sensex gained 0.9 percent to 28,446.12, the highest close since April 16, while a measure of medium-sized companies reached a record. Foreign direct and portfolio inflows will be combined with investments by expatriate Indians under a common cap for sectors, Finance minister Arun Jaitley said Thursday. The move simplifies procedures and leaves room for further stake purchases by overseas investors.
“It’s a practical initiative that the government has taken as there’s no reason to have a cap on how much shareholding can come through FII or through FDI,” Keki Mistry, chief executive officer at Housing Development Finance Corp., said in an interview to Bloomberg TV India. The policy “helps foreign investments,” he said.
The Sensex has risen 2.8 percent so far this week, set for the biggest gain in four weeks, as Greece’s agreement with its creditors boosted demand for emerging-market stocks. Foreigners are net buyers of Indian shares this month for the first time since April.
The new measures come against the backdrop of an increase in spending by Prime Minister Narendra Modi’s government. The planned spending in April-May was 13.4 percent of the amount budgeted for the year ending March 2016, compared with 10.4 percent in the same period last year.
An increase in tax revenue has given Modi ammunition to boost expenditure. Indirect tax receipts jumped 37 percent in May from a year earlier, the most since 2011. The 45 percent drop in Brent crude prices over the past year has meant that India, which buys about three-quarters of its oil, is saving money that would normally go toward subsidies.
“India is on a relatively much better wicket and that is what is going to drive inflows to this market,” R. Sreesankar, head of institutional equities at Prabhudas Lilladher Pvt. in Mumbai, said in an interview to Bloomberg TV India today. “The incremental liquidity is coming here.”
Axis rallied 4.2 percent, the most on the Sensex. Yes Bank gained 3.2 percent and Kotak Mahindra Bank jumped 4.1 percent. HDFC Bank added 1.6 percent, while HDFC rose 1.5 percent.
“Composite caps should be positive for Axis, Kotak and Yes Bank as it would lead to increased weighting or inclusion in various MSCI indices, leading to $150 million inflows into these stocks,” Chakri Lokapriya, the Mumbai-based chief investment officer at TCG Advisory Services Pvt., which manages about $3 billion in assets worldwide, said by phone.
Reliance Industries advanced 1.2 percent. Tata Power rose for a fourth day.
Foreigners bought a net $70 million of domestic stocks on July 14, extending the year’s inflow to $6.9 billion. They’ve purchased $680 million of local shares so far this month after a combined net outflow of more than $1 billion in May and June, data compiled by Bloomberg show.
The Sensex has risen 3.4 percent this year and trades at 15.8 times projected 12-month profits. The MSCI Emerging Markets Index is valued at a multiple of 11.6.