Indian Stocks Rise Most in Two Weeks on Rupee as Deficit Narrows

Indian stocks climbed the most in almost two weeks after a report showing narrower-than-expected current-account deficit helped the rupee rebound from a record low. Global equities rose on speculation U.S. policy makers may hold back from paring monetary stimulus.

The S&P BSE Sensex rallied 1.8 percent to 18,875.95 at the close in Mumbai, the biggest gain since June 14, with volume 38 percent higher than the 30-day average. Reliance Industries Ltd. and Oil & Natural Gas Corp. jumped at least 3 percent before a meeting to review natural-gas prices. HDFC Bank Ltd. paced gains among lenders.

The current-account gap narrowed to 3.6 percent of gross domestic product in the March quarter from a record 6.7 percent in the preceding three months, the central bank said. The data’s release a day before expected is aimed at calming nerves after the rupee touched an all-time low yesterday, Yes Bank Ltd. said. The U.S. economy grew less than previously estimated, spurring speculation the Fed may continue with its bond-buying program.

“India’s macroeconomic indicators seem to be improving,” Manish Sonthalia, who manages about $200 million in stocks at Motilal Oswal Asset Management Co. in Mumbai, said by phone. “The world had jumped to a conclusion on Fed’s quantitative easing. We expect the program to continue for some time as data is not signaling a recovery” in the U.S. economy, he said.

Reliance, owner of the world’s largest refining complex, soared 3.3 percent to 830 rupees. Oil & Natural Gas, India’s largest state-run explorer, jumped 3.8 percent to 320.25 rupees. HDFC Bank climbed 3.8 percent to 646.5 rupees. Housing Development Finance Corp., the biggest mortgage lender, surged

4.2 percent to 837.15 rupees. Axis Bank Ltd. increased 2.1 percent to 1,275.05 rupees.

Rupee Performance

The current-account shortfall was $18.1 billion in the three months ended March, compared with a revised $31.9 billion in the previous quarter, the Reserve Bank said. The median of 14 estimates in a Bloomberg survey was for a $21 billion gap.

The rupee advanced 0.9 percent to 60.20 per dollar in Mumbai, the biggest gain since June 12. The currency has fallen

6.1 percent in June, the world’s worst performance, and plunged

9.8 percent this quarter, the most since 1992. The rupee sank to an all-time low of 60.765 yesterday.

The Sensex has dropped 2.8 percent this year, reversing gains after reaching a a two-year high May 17, as the prospect of reduced U.S. monetary stimulus exposes emerging markets to the risk of capital outflows. The gauge is valued at 12.6 times projected 12-month profits, near the cheapest since April. The MSCI Emerging Markets Index trades at 9.6 times.

‘Reasonably Valued’

“The markets are starting to look more reasonably valued at about 12.5 times,” Prabhat Awasthi, head of equity research at Nomura Holdings Inc., told Bloomberg TV India today. “While outflows may continue, at some point valuations will come to a point at which investors would start looking more favorably.”

Overseas investors pulled $94 million from domestic shares yesterday, a 12th day of net sales, the longest run of outflows since March 2009, data compiled by Bloomberg show. Foreigners have still bought a net $13.5 billion this year, a record for the period, the data show.

The CNX Nifty Index on the National Stock Exchange of India rallied 1.7 percent to 5,682.35. Its June futures settled at 5,682.35. India VIX, which gauges the cost of protection against losses in the Nifty, tumbled 11 percent.

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