Indian stocks climbed the most in six weeks after the government moved to expand the size of an annual capital injection into state-owned lenders amid an increase in stressed assets.
State Bank of India surged the most since May, while ICICI Bank Ltd., the largest private lender, rose the most in three months after reporting a record quarterly profit. Dr. Reddy’s Laboratories Ltd. climbed to an all-time high after its results beat forecasts, while Hero MotoCorp Ltd., a motorcycle maker, jumped the most in nine months.
The S&P BSE Sensex soared 1.5 percent to 28,114.56 at the close, erasing a weekly and monthly loss. The ministry wants to raise the cash to be injected into lenders in the year to March 31 to 120.1 billion rupees ($1.87 billion), documents tabled in parliament Friday show. Bad debts at state-owned banks climbed to a 13-year high and capital ratios declined, according to central bank data.
“The capital infusion plan as well as hope of a rate cut in Tuesday’s monetary policy meeting” spurred gains in banks, Vaibhav Sanghavi, managing director at Ambit Investment Advisors Pvt. in Mumbai, said by phone.
State Bank soared 5.2 percent, the best performer on the Sensex. Union Bank of India jumped 7.6 percent. United Bank of India rallied 4.5 percent, Oriental Bank of Commerce surged 4.4 percent and Indian Overseas Bank added 4.1 percent.
The government set aside 69.9 billion rupees for lenders in the year ended March 31, which was the lowest total since at least 2009. The proposed increase needs approval from lawmakers.
ICICI Bank increased 3.9 percent, the most since May 8. First-quarter profit of 29.8 billion rupees exceeded the median estimate of 29.2 billion rupees in a Bloomberg survey.
Larsen & Toubro Ltd., the most-valuable engineering firm, said first-quarter profit declined 22 percent to 7.01 billion rupees, missing the 8.05 billion rupees estimated by analysts. Earnings were announced after trading ended. The shares rose 1 percent.
Twelve of the 18 Sensex companies, or 67 percent, that have posted results for the June quarter have matched or exceeded estimates, compared with 40 percent in the March quarter.
The Sensex erased the week’s losses after Federal Reserve on Wednesday refrained from providing timing for raising the near-zero U.S. rates that have helped fuel capital flows into emerging markets. Foreigners have injected $886 million into Indian stocks this month, the only inflows among eight Asian markets tracked by Bloomberg.
“On the capital flows, we seem to be doing alright,” Mahesh Nandurkar, a strategist at CLSA Asia-Pacific Markets, said in an interview on Thursday. “India stands out in the sense that it has relatively lower exports or exposure to the rest of the world.”
The Sensex has gained 2.2 percent this year and trades at 15.7 times projected 12-month earnings. The MSCI Emerging Markets Index is valued at a multiple of 11.2.