Indian stocks gained, led by companies tied to the economy, as some investors bet the selloff that sent the benchmark gauge to its third weekly loss in a month was overdone.
Axis Bank Ltd. and State Bank of India had their steepest gain in a week. Coal India Ltd., the world’s biggest producer, and Larsen & Toubro Ltd., an engineering firm, were among the top performers on the S&P BSE Sensex. Hindalco Industries Ltd. and Vedanta Ltd., the largest producers of aluminum and copper, helped an index of metalmakers to a second day of gains.
The Sensex gained 0.8 percent at close, ending three days of declines. The gauge is set to post its worst monthly loss in more than four years as global funds withdrew $2.5 billion from local shares since Jan. 1 as they turn averse to emerging-market assets. The selloff has dragged the index’s valuation to near the cheapest level since May 2014.
“Stocks are at reasonable valuations, which was not the case a year ago,” Mahesh Patil, co-chief investment officer at Birla Sunlife Asset Management Co., which has $20 billion in assets, said in an interview to Bloomberg TV India. “India is not as inexpensive as other emerging markets but the growth outlook is much better going forward. I am seeing good opportunities, especially in large-cap names.”
The government must review its fiscal deficit targets, Finance Minister Arun Jaitley’s advisers said in a report three days before he unveils tax and expenditure proposals for the year starting April 1. India’s current plan aims to shrink the gap by 0.4 percentage points in the year starting April 1, to 3.5 percent from an estimated 3.9 percent.
Jaitley is under pressure to bolster state finances without curbing stimulus spending amid mixed signs of economic strength. While India is forecast to overtake a slowing China as the world’s fastest-growing big economy, two straight years of poor rainfall have eroded incomes of the bulk of the nation’s population. The survey estimates the economy to grow 7 percent to 7.75 percent in the coming year. China expanded 6.9 percent in 2015, while Russia contracted 3.7 percent and Brazil is forecast to shrink 3.7 percent.
Axis Bank rose 2.2 percent to 386.35 rupees, while State Bank of India jumped 2.7 percent to 155.90 rupees. Coal India rallied 4 percent to 311.45 rupees and Larsen & Toubro added 2.2 percent to 1,110.65 rupees. Hindalco added 3.4 percent and Vedanta rose 3.2 percent.
The Sensex is valued at 14.4 times its estimated 12-month earnings, versus a multiple of 10.9 for the MSCI Emerging Markets Index. Foreigners sold a net $155 million of Indian stocks on Thursday, taking this month’s outflow to $836 million. They bought $3.3 billion of shares last year, the smallest in four years.