India’s Sensex Advances Most in 18 Months on Energy Reforms

India’s benchmark stock index headed for the biggest gain in 18 months after the government agreed to increase natural-gas prices and as the rupee rallied. Oil & Natural Gas Corp. jumped to a four-week high.

The S&P BSE Sensex soared 2.9 percent to 19,417.74 at 3:13 p.m. in Mumbai, the sharpest gain since Dec. 21, 2011. Volume on the gauge was 53 percent more than the 30-day average for this time of day. Reliance Industries Ltd., the owner of the world’s largest oil-refining complex, surged 3.9 percent. Coal India Ltd. jumped the most in two years after the government approved setting up of a regulator to help settle disputes.

The Cabinet yesterday approved a report by a panel that recommended linking gas prices to global benchmarks. Prices may increase to as much as $8 per million British thermal units starting April 1, petroleum secretary Vivek Rae said. That’s almost double the current level. Reliance and partner BP Plc have been seeking higher prices even as slumping local output forces the country to import expensive gas, adding to a widening current-account deficit and a weakening currency.

“Gas pricing is one of the biggest bullets the government has bitten,” Surya Narayan Nayak, an analyst at Networth Stock Broking Ltd., said by telephone from Mumbai today. “This will boost investment in the energy sector and reduce our dependence on imported oil. It’s positive not only for Reliance and ONGC but also for the rupee and market sentiment.”

As part of an economic-policy overhaul that started nine months ago, the government eased controls on diesel prices in January to cut fuel subsidies. State-run refiners sell diesel, kerosene and cooking gas below cost to help curb inflation. The government compensates them for such losses, while producers including ONGC give discounts on crude supplies.

Global Prices

Reliance climbed 3.9 percent to 862 rupees, increasing this month’s advance to 6.5 percent, the most on the Sensex. Oil & Natural Gas increased 3 percent to 329.85 rupees. The gas prices will be effective April 1, 2014, as a weighted average of prices in the U.S., U.K., and imports by Japan and India in 2013. Reliance and ONGC have a 14 percent weight in the Sensex.

The rupee strengthened 1.4 percent to 59.3350 per dollar at 3:16 p.m., headed for the biggest gain since Sept. 21. The currency fell to an all-time low of 60.765 on June 26 after Fed Chairman Ben S. Bernanke said June 19 the stimulus, which has fueled demand for emerging-market assets, may end next year.

Stocks also climbed as U.S. and Japanese data boosted the outlook for the global economy and Federal Reserve officials downplayed investor speculation they will curb stimulus soon. The MSCI Asia Pacific Index gained, heading for its biggest three-day advance since July.

Lenders Climb

Coal India rallied 6.5 percent to 306.5 rupees, the most since July 27, 2011. Setting up of the regulator will settle disputes over the quality and quantity of coal supplies that have deprived thermal power plants of adequate fuel, prompting them to import coal from overseas. NTPC Ltd., India’s largest electricity generator which has a dispute with Coal India, surged 3 percent to 144.45 rupees.

Tata Power Co., India’s biggest electricity generator outside state control, rose 4.9 percent to 85.3 rupees. Bharat Heavy Electricals Ltd., India’s biggest power-equipment maker, soared 6.2 percent to 173.05 rupees, halting an eight-day, 11 percent slide.

ICICI Bank Ltd., the biggest private lender, increased 3.9 percent to 1,070.95 rupees. HDFC Bank Ltd., the most valuable lender, rose 2.7 percent to 664.1 rupees. State Bank of India, the nation’s biggest, climbed 1.9 percent to 1,948.65 rupees. Housing Development Finance Corp. surged 4.6 percent to 875.65 rupees.

Mahindra, Larsen

Tata Motors Ltd., India’s biggest truckmaker and owner of Jaguar Land Rover, surged 3.6 percent to 279.9 rupees, ending an eight-day, 10 percent slump. Mahindra & Mahindra Ltd., the largest maker of sport-utility vehicles and tractors, gained 2.7 percent to 959 rupees.

Larsen & Toubro Ltd., the largest engineering company, climbed 3.9 percent to 1,403 rupees. Jindal Steel & Power Ltd. rose 7 percent to 215.5 rupees, its biggest gain since Sept. 14. India’s third-largest steelmaker by value is in talks to acquire an iron ore mine in Liberia, said two people familiar with the matter. Tata Steel Ltd., India’s biggest producer of the alloy, gained 3.4 percent to 273.1 rupees, ending six days of fall.

Overseas funds pulled $94 million from domestic shares yesterday, a 12th day of net sales and the longest stretch of outflows since March 2009, data compiled by Bloomberg show. Foreigners offloaded a net $1.63 billion of Indian stocks this month through June 26, heading for the biggest monthly outflow since August 2011.

Foreigners have still bought a net $13.5 billion of Indian stocks this year, a record for the period, the data show.

The Sensex has dropped 0.3 percent this year, reversing gains after reaching a two-year high May 17, as the prospect of reduced U.S. monetary stimulus prompted global investors to pull money from emerging-market assets. The gauge is valued at 12.9 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s 9.8 times.

The CNX Nifty Index on the National Stock Exchange of India rallied 2.6 percent to 5,828.15.

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