Indian Stocks End Five-Day Slide on Diwali Session as FDI Eased

  • Government relaxes foreign-investment rules for 15 industries
  • Developers, industrials lead gainers in shortened session

Indian stocks ended five days of losses in a shortened trading session on Diwali as Prime Minister Narendra Modi eased rules for foreign direct investment to revive the economic reform momentum.

Axis Bank Ltd. was the best performer on the S&P BSE Sensex, while DLF Ltd. and Unitech Ltd. paced gains among developers after the government allowed global funds to invest in construction projects. TV Today Network Ltd. rose more than 5 percent, Hathway Cable & Datacom Ltd. soared 10 percent and Tata Coffee Ltd. increased the most in about three months as the companies benefit from Modi’s decision to relax investment norms for 15 industries. InterGlobe Aviation Ltd., the nation’s biggest airline, extended gains made in its debut on Wednesday.

The Sensex rose 0.5 percent to 25,866.95 in the one-hour session in Mumbai, the biggest gain since Oct. 23. Foreigners can now own 100 percent in cable and direct-to-home TV operators, duty free shops and limited liability partnerships, the government said in a statement after trading ended Tuesday. Overseas investors can buy 49 percent of defense companies and regional airlines without government approval, while those that still need permissions can get them through a simpler process. The move came after Modi’s election defeat in Bihar over the weekend raised concerns about his ability to push through policies to boost economic growth and sent stocks to a six-week low.

“The government will be in full throttle," said Shishir Bajpai, a director at Mumbai-based IIFL Wealth Management Ltd., which has $12 billion under management and advisory. “It is a clear signal that executive decisions will move faster than ever before. There are lot of foreign trips the prime minister has lined up, so he has to ease investment limits and increase the ease of doing business." The Sensex may climb 30 percent till next Diwali, he said.

Modi starts his visit to the U.K. on Thursday to boost trade ties between the two nations. Foreign direct investment into India has risen 30 percent in the April-June period to $9.5 billion from a year ago, according to data provided by the commerce ministry. It touched a record $35 billion in the 12 months through March 2012.

Investors and traders made ceremonial purchases in the session marking Diwali, the festival of lights and the start of the Hindu new year, Samvat 2072. The session known as Muhurat trading is held every year on Diwali and deemed the most auspicious time to start investments.

The Sensex dropped 3.7 percent since last Diwali on Oct. 23, 2014, as foreign inflows slowed amid reduced demand for emerging-market assets and the euphoria over Modi’s economic agenda faded. Shares of just 10 of the 30 index members have risen since last year’s Muhurat day, led by Maruti Suzuki India Ltd. with a 50 percent rally and Lupin Ltd., which climbed 29 percent. Vedanta Ltd., India’s biggest copper producer, plunged 63 percent, while Tata Steel Ltd. slumped 52 percent.

Global funds sold $106 million of local stocks on Nov. 9, paring this year’s inflows to $4.3 billion. The Sensex has lost 5.9 percent this year and trades at 15.2 times projected 12-month earnings, compared with a multiple of 11.1 for the MSCI Emerging Markets Index.

The markets will remain closed tomorrow for Diwali and resume regular trading on Friday.

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