India's Sensex Pares Weekly Drop as Risk Returns on U.S. Growth

Indian stocks advanced, capping a week that saw the benchmark index plunge the most in six years, as concerns eased after strong U.S. economic growth data boosted optimism that strength in America may counter the slowdown in China. Energy and technology companies rallied.

Oil & Natural Gas Corp., India’s largest explorer, surged the most in four months and Vedanta Ltd., the biggest copper producer, capped its steepest two-day advance in 15 months. Infosys Ltd., the second-largest software exporter, climbed the most in two weeks. Bharti Airtel Ltd. surged after a report the company plans to sell its operations in two neighboring countries.

The S&P BSE Sensex added 0.6 percent to 26,392.38 at the close in Mumbai as the cheapest valuations since June and a rebound in Chinese equities spurred appetite for riskier assets. The measure plunged 5.9 percent on Monday, the most since January 2009, tracking a global selloff. It pared the week’s loss to 3.6 percent, the most in two months, amid a relief rally that swept across the globe Thursday. The demand for protection against volatility pushed the India VIX Index up 36 percent this week, the steepest climb since 2008.

“Thanks to the Chinese crisis, the valuation comfort has come back to the Indian markets," Harsha Upadhyaya, chief investment officer for equities at Kotak Mahindra Asset Management Co., which has $7.3 billion in assets, said in an interview with Bloomberg TV India. “This is the right time to invest." He recommends automakers and cement producers.

Data on Thursday showed U.S. gross domestic product expanded at a 3.7 percent annualized rate, exceeding all estimates of economists surveyed by Bloomberg, and up from the 2.3 percent reported last month. India’s government releases second-quarter growth data on Aug. 31. The economy grew 7.4 percent in the June quarter, versus 7.5 percent in the preceding three months, according to the median estimate of 15 analysts surveyed by Bloomberg.

Fund Outflows

The Sensex is poised for its worst month since May 2012 as overseas investors have pulled$2.52 billion from Indian shares so far in August, headed for the biggest monthly outflow since October 2008. The index is valued at 15 times projected 12-month profits, up from 14.6 on Wednesday, which was the cheapest since June 7. Investors, including Reliance Capital Asset Management Ltd. and Aberdeen Asset Management Plc., say the slump is an opportunity to buy as company earnings are expected to rebound amid a rout in commodities.

The 54 percent plunge in Brent crude oil over the past 12 months has helped curb India’s current-account deficit and consumer-price gains, improving the outlook for Asia’s third-largest economy. Moody’s Investors Service said Tuesday policies to curb price pressures could help the nation win a debt rating upgrade.

ONGC increased 5.8 percent, rebounding for a second day from a six-year low. Vedanta jumped 5.9 percent, the best performer on the Sensex on Friday. The stock rose 2.1 percent this week, erasing a 14 percent plunge on Monday.

Aluminum producer Hindalco Industries Ltd. rose for a second day, while NTPC Ltd., the top power generator, climbed to one-week high.

Infosys added 2.6 percent to a one-week high. Bharti Airtel rallied 4.4 percent, the most since May 29. India’s biggest telecom operator has appointed two bankers to sell its telecom operations in Sri Lanka and Bangladesh, CNBC-TV18 television reported Friday, without saying where it got the information from.

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