Indian Stocks Rebound to Near Two-Year High; ITC, HDFC Advance

Indian stocks rebounded in the last half-hour of trade, with the benchmark index climbing to near a two-year high. ITC Ltd. and lenders led the advance.

The BSE India Sensitive Index, or Sensex, rose 0.3 percent to 19,742.52 at the 3:30 p.m. close in Mumbai, after declining by as much earlier. ITC, the nation’s biggest cigarette maker, climbed for the first time in five days. Housing Development Finance Corp., the largest mortgage lender, gained 2.1 percent, pacing gains among financial companies.

Global funds purchased a net $1.1 billion of Indian equities in the first five days of this month, exchange data show, after U.S. lawmakers averted more than $600 billion in tax increases and spending cuts on Jan. 1. The Sensex rallied 26 percent in 2012, its biggest annual gain since 2009, as policy measures to revive an economy expanding at the slowest pace in three years prompted foreigners to invest a net $24.5 billion into shares, the highest among 10 Asian markets tracked by Bloomberg.

“The rally is been driven by inflows and each time the market loses some ground foreign investors use it as a buying opportunity,” Gajendra Nagpal, chief executive officer at New Delhi-based Unicon Financial Intermediaries Pvt., said in a telephone interview today.

ITC rallied 2.4 percent to 285.7 rupees, the top performer on the Sensex. Housing Development Finance rose 2.1 percent to 840.3 rupees, ending three days of losses. State Bank of India, the nation’s biggest commercial lender, increased 1 percent to 2,493.35 rupees, extending last week’s 4.5 percent rally. HDFC Bank Ltd., the second-biggest private lender, climbed for the first time in four days, adding 0.3 percent to 670.25 rupees.

Metals Drop

Larsen & Toubro Ltd., the nation’s biggest engineering company, slid for the fourth day after it was downgraded by Citigroup Inc. and Barclays Plc. The stock lost 1.3 percent to 1,566.9 rupees. Tata Steel slid 1.7 percent to 433.35 rupees, paring last month’s 11 percent advance. Sterlite Industries (India) Ltd., the nation’s biggest copper and zinc producer, slid 1.1 percent to 118.85 rupees.

The rupee gained 0.4 percent 55.005 per dollar, erasing an earlier fall, after the Press Trust of India reported the economic affairs secretary Arvind Mayaram saying the government “was not worried” as it would restrict the fiscal deficit to 5.3 percent of gross domestic product and meet the 300 billion-rupee asset-sale target for the year ending March 2013.

The rupee had lost 0.3 percent intraday after Fitch said today India may face a downgrade in the next 12 to 24 months.

‘Right Actions’

Prime Minister Manmohan Singh opened the nation to more overseas investments in the past four months to revive growth and avert a downgrade of the nation’s credit rating. Standard and Poor’s and Fitch lowered their outlooks on India’s rating, currently at the lowest investment-grade level, to negative in 2012 and said the country’s large fiscal deficits and debt are constraining ratings.

“Right government actions such as reduction in subsidies and greater divestment proceeds would result in narrower fiscal deficit,” Sanjiv Duggal, Singapore-based investment director at HSBC Global Asset Management, said in an e-mail interview yesterday. “Positive government actions” will aid recovery in India’s investment cycle, he said.

The S&P CNX Nifty Index on the National Stock Exchange of India increased 0.2 percent to 6,001.70. Its January futures settled at 6,041.70. The BSE Mid-Cap Index gained less than 0.1 percent. India VIX, which gauges the cost of protection against losses in the Nifty, lost 4.7 percent to 13.27.

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