Indian Stocks Reach Two-Year High After U.S. Clears Budget BillShikhar Balwani
Indian stocks climbed to a two-year high as U.S. lawmakers passed a bill averting spending cuts and tax gains threatening a recovery in the world’s biggest economy, and as domestic manufacturing expanded.
The BSE India Sensitive Index, or Sensex, rose 0.7 percent to 19,714.24, its highest close since Jan. 6, 2011. Volumes on the gauge were 10 percent lower than the 30-day average. Bharat Heavy Electricals Ltd., the top power-equipment maker, jumped 2.3 percent. Bajaj Auto Ltd., the second-biggest motorcycle maker, rallied to a record. The 50-stock S&P CNX Nifty Index crossed the 6,000 mark intraday for the first time in 24 months.
President Barack Obama said he will sign into law the bill undoing tax increases for more than 99 percent of households. The bipartisan vote breaks a yearlong impasse over how to stave off $600 billion in tax increases and spending cuts. The U.S. fiscal cliff and Europe’s debt crisis offer “major downside risks” to global growth, India’s central bank said last week.
“The deal’s done and that is boosting sentiment,” Arun Kejriwal, director at Kejriwal Research & Investment Services Pvt. in Mumbai, said in a phone interview. “Removal of this overhang will raise investors’ risk appetite, which augurs well for emerging-market equities.”
A gauge of industrial stocks jumped 1.9 percent, the most among 10 industry groups of the MSCI India Index. Bharat Heavy climbed 2.3 percent to 238.05 rupees, its highest close since Dec. 10. Larsen & Toubro Ltd., the largest engineering and construction company, added 1.5 percent to 1,649.55 rupees.
Bajaj Auto rallied 3.3 percent, the most on the Sensex, to a record 2,202.25 rupees. The company’s December sales rose 13 percent from a year ago to 343,946 units. Maruti Suzuki India Ltd., the largest carmaker by volume, advanced 2.8 percent to 1,557.40 rupees, its highest close since Oct. 26, 2010. It’s scheduled to report December sales tomorrow.
Sterlite Industries (India) Ltd., the largest copper producer, gained 2.1 percent to 121.45 rupees, a 10-month high. Most metal stocks rose as prices surged on optimism clearing of the U.S. budget bill will boost demand. Copper led industrial metals higher in London. Aluminum, zinc, tin and nickel rose.
Indian manufacturing expanded at the fastest pace in six months in December, a private survey showed today, after the government overhauled policies to revive Asia’s third-largest economy. The purchasing managers’ index rose to 54.7 from 53.7 in November, HSBC Holdings Plc and Markit Economics said in a statement. A number above 50 indicates growth.
Prime Minister Manmohan Singh in September raised diesel prices and opened the economy to further foreign investment in a series of steps to stimulate economic growth that slowed to a three-year low. The policies led to foreign funds plowing a net $24.5 billion into local stocks in 2012, the highest among 10 Asian markets tracked by Bloomberg, driving up the Sensex 26 percent last year, the most since an 81 percent surge in 2009.
Foreigners bought a net $149 million worth of Indian shares yesterday, data from the market regulator show.
The 30-stock measure is valued at 15.6 times estimated earnings, the highest since March, data compiled by Bloomberg show. That compares with a multiple of 12.3 for the MSCI Emerging Markets Index.
The S&P CNX Nifty Index on the National Stock Exchange of India added 0.7 percent to 5,993.25 while its January futures traded at 6,033.95. The BSE Mid-Cap Index climbed 0.6 percent. India VIX, which measures the cost of protection against losses in the Nifty, increased 0.2 percent to 13.71.
India’s rupee rose to the highest level in almost three weeks.