India’s Sensex Jumps Most in Three Months as Global Stocks Rally

  • U.S. homes sales rise to 8-year high, fueling global optimism
  • Bajaj Auto paces gains among automakers; ICICI leads banks

Indian stocks soared the most in three months, led by lenders and automakers, as global equities rose after a surge in U.S. home sales increased speculation the world’s biggest economy can withstand higher borrowing costs.

ICICI Bank Ltd. and State Bank of India were among the biggest gainers on the S&P BSE Sensex. Bajaj Auto Ltd. posted its steepest climb in a month after its sales beat analyst estimates, Maruti Suzuki India Ltd. rose to a four-month high and Tata Motors Ltd., owner of Jaguar Land Rover, advanced the most in two weeks. Cipla Ltd. plunged to a 21-month low after the drugmaker’s quarterly earnings missed estimates.

The Sensex surged 2.3 percent, the steepest gain since March 1, at the close in Mumbai. Asian stocks rebounded from a seven-week low and U.S. equity index futures advanced amid speculation the American economy can tolerate higher interest rates as odds climb the Federal Reserve will tighten policy this summer. Gains in global stocks prompted local traders to close their bearish bets before the expiry of monthly derivatives contracts on Thursday, further boosting the Sensex, according to brokerage Pratibhuti Viniyog Ltd.

“We’re being governed more by what is happening globally than domestically," Nitasha Shankar, vice president for equity research at Yes Securities Ltd. in Mumbai, said in an interview with Bloomberg TV India. A 25-basis point increase by the Fed “is priced in. The next driver is going to be the monsoon and everybody is waiting for it,” she said.

Plentiful Rain

Showers in the June-September season starting June 1 are seen at 109 percent of the average of about 89 centimeters (35 inches), more than the 105 percent predicted in April, Skymet Weather Services Pvt., a New Delhi-based private forecaster, said Tuesday. That’s more than the 106 percent forecast by the state-owned India Meteorological Department and would be the highest since 1994.

“Monsoon failures in the last two years completely dried up farm incomes, depressing demand,” Anand Tandon, an independent analyst, said in an interview to Bloomberg TV India. “We’re hoping the actual rainfall is as good as the prognosis, fingers crossed, even though we know that rural demand growth will revive only after the next harvest.”

ICICI Bank jumped 4.7 percent to its highest price since April 29. State Bank of India increased 3.3 percent, the most since April 21. Mortgage lender Housing Development Finance Corp. added 2.9 percent, the most since May 9.

Earnings Scorecard

Bajaj Auto, a two-wheeler maker, jumped the most since April 13. The company’s fourth-quarter profit of 8.03 billion rupees matched analyst estimates. Sales of 53 billion rupees exceeded the 52.6-billion rupee estimate. Maruti Suzuki increased 3.5 percent and Tata Motors rose 2 percent.

Cipla dropped 4.4 percent, the most since Aug. 24. The drugmaker said after market hours Tuesday that its fourth-quarter profit slid 69 percent to 808.7 million rupees. That lagged behind the analysts’ estimate of 3.54 billion rupees.

Ten of 19, or 53 percent, of Sensex companies that have posted March-quarter results so far have beaten or matched estimates. That compares with 53 percent in the December quarter and 57 percent in the period ended September.

Foreigners sold $5.3 million of local stocks on May 23, paring the month’s inflow to $163 million. They bought $585 million of shares in April and $4.1 billion in March, which was the most in three years.

The Sensex has fallen 0.9 percent this year and trades at 16 times 12-month forward earnings. That compares with 11.5 times for the MSCI Emerging Markets Index.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE