Indian Stocks Rise; Hindustan Unilever Falls on Downgrade

Indian stocks rose, led by telecom companies and banks, after the finance minister pledged to cut the fiscal deficit and boost economic growth.

The BSE India Sensitive Index, or Sensex, added 0.2 percent to 20,026.61 at the close. Bharti Airtel Ltd., India’s largest cell-phone operator, paced gains among its peers after raising call rates. ICICI Bank Ltd., the nation’s second-biggest lender, climbed 0.9 percent, rebounding from an earlier drop. ITC Ltd., the largest cigarette company, climbed to a one-month high, the biggest boost to the Sensex.

Finance Minister Palaniappan Chidambaram told investors in Singapore today the nation’s budget gap won’t breach his target of 5.3 percent of gross domestic product this fiscal year. The Sensex is up 3.1 percent this year, after jumping 26 percent in 2012, as government measures to lift growth prompted foreigners to plow a net $2.9 billion into local shares, a record for the period, according to data compiled by Bloomberg.

“The pace of reforms has been a real positive surprise,” K. Ramanathan, chief investment officer at ING Investment Management, told Bloomberg TV India today. “We are positive on the markets but realize that valuations are no longer cheap. Market movement will be in line with earnings growth.”

Only two out of 11, or 18 percent, of Sensex firms that have reported December-quarter earnings have missed forecasts, compared with 40 percent in the previous two quarters, data compiled by Bloomberg show. The gauge is valued at 15.8 times estimated earnings, the highest since February 2012. Brazil’s Bovespa Index trades at 11.7 times estimated profit, Russia’s Micex Index at 5.7 times and China’s Shanghai Composite Index at 10 times, data compiled by Bloomberg show.

Telecom Rally

Bharti Airtel soared 4.5 percent to 367.35 rupees, the highest close since Feb. 7. The company said it raised call rates to pass on rising costs. Rival Reliance Communications Ltd. added 0.5 percent to 88.05 rupees, while Idea Cellular Ltd. increased 0.6 percent to 118.5 rupees. Tata Teleservices Maharashtra Ltd. jumped 3.7 percent to 12.75 rupees.

ICICI Bank increased 0.9 percent to 1,181 rupees. Housing Development Finance Corp., the top mortgage lender, gained 0.9 percent to 820.85 rupees and HDFC Bank Ltd. added 0.4 percent to 656.6 rupees. ITC increased 1.3 percent to 292.75 rupees, extending last year’s 42 percent rally.

Chidambaram, 67, said fiscal prudence will be a key theme in next month’s federal budget and pledged to deepen the economic-policy overhaul by implementing a goods and services levy to boost commerce and widen the tax base. He is on a tour of Asia and Europe to woo investors.

Standard & Poor’s and Fitch Ratings warned last year that they may strip India of its investment-grade credit rating on risks including fiscal and trade shortfalls.

Royalty Payment

Hindustan Unilever Ltd. tumbled 4.3 percent, the steepest decline since Jan. 25, 2011, to 460.05 rupees. India’s biggest home-products maker was downgraded by brokerages after it said yesterday royalty payments to its parent will rise, and posted profit that missed estimates. CLSA Asia-Pacific Markets cut its recommendation to sell from outperform. Credit Suisse Group AG, Nomura Holdings Inc. and Morgan Stanley lowered their ratings .

The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. added 0.1 percent to 6,054.30. The India VIX index, which measures the cost of protection against losses in the Nifty, fell 1.6 percent to 13.67. The BSE Mid-Cap Index tumbled 0.9 percent.