Indian Stocks Climb to Erase Weekly Decline as Lenders Advance

  • SBI soars 7% as bad loan concerns ease, profit beats estimates
  • Foreign investors net buyers for longest stretch in two years

Indian stocks rose, with the benchmark gauge erasing a weekly decline, as overseas investors extended their purchases of local assets.

State Bank of India rallied to an eight-month high after the nation’s largest lender posted a smaller-than-expected rise in soured debt. Axis Bank Ltd. increased to a one-year high and ICICI Bank Ltd. rose for a second day. Tata Motors Ltd. and Mahindra & Mahindra Ltd., the largest tractor maker, were among the top performers on the S&P BSE Sensex. Larsen & Toubro Ltd., the biggest engineering company, climbed for the first day this week.

The Sensex rallied 1.1 percent at the close in Mumbai, capping a third straight week of advance. Foreign funds have been net buyers for 25 days in a row, the longest stretch since Prime Minister Narendra Modi came to power in May 2014, as above-average rain after back-to-back droughts improves the outlook on company earnings and global central banks remain supportive of growth.

“This rally has been been driven by liquidity and every small fall is being bought into aggressively,” Kaushik Dani, a fund manager at Karvy Stock Broking Ltd. in Mumbai, said by phone. “The gush of liquidity has been strong. Good monsoon rains, the passing of the goods-and-services tax bill and company earnings that are in line with expectations have helped.” Dani said he’s bullish on automakers, cement companies and mortgage lenders.

Twelve of the 22 companies on the index that have reported June-quarter results have met investor expectation.

State Bank rallied 7.1 percent, the most since March 2. Bad loans as a percentage of total lending rose 44 basis points since March to 6.94 percent by June, the lender said Friday in an filing. The increase was a fraction of the 116 basis-point surge reported by rival Bank of Baroda on Thursday.

“There’s Less bad news and that’s a good news," Vijay Chopra, managing director of New Delhi-based Enoch Ventures Pvt., said by phone. “The market was expecting higher bad loans. SBI’s numbers are looking much better compared with Bank of Baroda."

Aditya Birla Nuvo slumped 17 percent, the steepest loss since October 2008, and Grasim Industries Ltd. added 0.5 percent after falling as much as 8.5 percent earlier as investors showed their disappointment in billionaire Kumar Mangalam Birla’s plan to combine the companies into a firm with $9 billion of revenues.

Birla Disappoints

Birla on Thursday announced the merger of Grasim, which controls India’s biggest cement maker, and ABNL, that has stakes in companies from a mobile-phone operator to a life insurer. Grasim dropped as brokerages including HSBC Holdings Plc said the transaction burdened the company with unrelated businesses including Idea Cellular Ltd., which needs a lot of investment amid intensifying competition. ABNL tumbled as much as 25 percent.

Axis Bank added 3.7 percent to its highest level since July 20, 2015. ICICI Bank rose 1.3 percent. Larsen & Toubro climbed 1.2 percent, ending four days of decline.

Tata Motors gained 2.7 percent to its highest level since May 2015, and Mahindra climbed 2.1 percent. India’s highest court allowed registrations of large diesel vehicles in New Delhi while introducing a new levy on purchases, lifting a ban automakers including Toyota Motor Corp. and Mahindra panned for hurting sales.

Blockbuster Drug

Sun Pharmaceutical Industries, the most valuable drugmaker, reported net income that more than tripled from a year ago as its exclusive right to sell the generic version of Novartis AG’s blockbuster cancer drug Gleevec in the U.S. helped offset price pressures in that market. The stock fell 1 percent in a sixth day of decline. 

“It should only be the Gleevec factor, and nothing else,” Surya Patra, an analyst with PhillipCapital India Pvt. in Mumbai, said by phone. “Post Gleevec exclusivity the numbers will sequentially see a downturn.”

Foreigners have bought a net $5.3 billion of local shares this year, the most after Taiwan and South Korea. The Sensex is valued at 16.4 times projected 12-month profits, near the highest since April 2015. A gauge of emerging market is valued at a multiple of 12.6.

The markets are close on Monday for Independence Day holiday.

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