India’s Sensex Completes Biggest Monthly Advance Since November

Indian equities climbed, pushing the benchmark index to the biggest monthly advance since November. Hindustan Unilever Ltd. surged after its parent said that it will increase its stake in the company.

The S&P BSE Sensex rose 0.6 percent to 19,504.18 by the close in Mumbai. Hindustan Unilever jumped 17 percent to a record after the world’s second-largest consumer goods producer said it will spend as much as $5.4 billion to boost its stake in the local unit to 75 percent. Sterlite Industries (India) Ltd. rose the most in seven weeks after profit beat estimates.

The Sensex has rebounded 7 percent from a seven-month low reached April 9 as slowing wholesale-price inflation and a drop in gold and oil prices stoked speculation the Reserve Bank will cut borrowing costs this week. The RBI may lower its key rate by 25 basis points at its May 3 review, according to the median of a Bloomberg economist survey. Imports of the two commodities fueled India’s record $32.6 billion current-account deficit in the last quarter of 2012, government data show.

“If the fall in oil and gold prices sustains it will ease worries on the current account,” Jyotivardhan Jaipuria, head of India research at Bank of America Corp., told Bloomberg TV India today. “The selloff in commodities has removed a lot of tail risks in India. It’s a welcome relief.”

Jaipuria said that he expects the RBI to cut rates by 100 basis points, or 1 percentage point, over the next year. That’s 25 basis points more than his previous estimate.

Bullion tumbled into a bear market April 12 and plunged 9.3 percent in the next session, the biggest drop in 33 years, while Brent, the benchmark for two-thirds of the world’s oil, dropped below $100 a barrel April 16 for the first time since July. India imports more than 80 percent of its oil needs and is the world’s largest bullion buyer.

Unilever Offer

Hindustan Unilever soared 17.4 percent to 583.8 rupees, a record close. Unilever Plc will pay 600 rupees a share for 487 million shares of Hindustan Unilever in an open offer, it said in a statement. Unilever is boosting its stake after the Indian unit reported a 15 percent increase in fourth-quarter earnings yesterday, beating analyst expectations.

Cigarette maker ITC Ltd. increased 1.3 percent to 328.85 rupees, a record. Hindustan Unilever and ITC have a combined 15 percent weighting on the Sensex.

The S&P BSE Fast-Moving Consumer Goods Index of 10 stocks jumped 4.7 percent to a record. Colgate-Palmolive (India) Ltd., the nation’s second-largest consumer-goods company, surged 5.8 percent to 1,471.45 rupees. Procter & Gamble Hygiene and Healthcare Ltd. jumped 6.3 percent to 2,734.45 rupees. Nestle India Ltd. added 5.2 percent to 4,981.35 rupees.

Shares of the three companies rose amid speculation their overseas parents may make offers to lift stakes after Unilever’s proposal, said Kunal Dalal, an analyst with K.R. Choksey Shares & Securities Pvt. in Mumbai.

Earnings Scorecard

Sterlite surged 4.2 percent to 95.7 rupees after group profit in the March quarter jumped 50 percent to 19.2 billion rupees. The median profit of 20 analyst estimates compiled by Bloomberg was 14.4 billion rupees.

Profit at just one of the 11 Sensex companies that have reported March-quarter results has trailed analyst estimates. Net income at about 43 percent of the 30 index firms trailed forecasts in the three months ended Dec. 31, compared with 40 percent in the previous two quarters.

Foreign funds bought a net $122 million of local shares on April 29, taking their net investment in equities this year to $11.15 billion, data compiled by Bloomberg show. Inflows last year totaled $24.5 billion, the most among 10 Asian markets tracked by Bloomberg, the data show.

ADRs Rally

The Sensex trades at 13.1 times projected 12-month profits, compared with a multiple of 10.4 for the MSCI Emerging Markets Index. Volumes on the gauge were 17 percent more than the 30-day average. The 50-stock CNX Nifty Index rose 0.4 percent to 5,930.20 while its May futures settled at 5,929.

The market is closed tomorrow for a public holiday.

Indian stocks in the U.S. also rallied today, with the Bank of New York Mellon index of Indian company American depositary receipts adding 1.8 percent to 1,066.20, the highest level since April 11. The gauge lost 3.8 percent in April, its third straight monthly drop.

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