India’s Sensex Advances to Record as Rupee Rallies on Inflows

India’s benchmark stock index rose to a record after the rupee strengthened to its highest level in eight months as foreign investors extended Asia’s largest equity-market inflows.

State Bank of India rallied to an eight-month high after the central bank extended the deadline for lenders to meet global capital norms by a year to March 2019. Tata Power Co. advanced the most on the S&P BSE Sensex. Hindalco Industries Ltd. jumped to a 14-month high, leading metalmakers higher.

The S&P BSE Sensex added 0.6 percent to 22,339.97, closing at a record for a fourth time this week. The measure has risen

5.5 percent this quarter, beating stocks in Brazil, Russia and China, as improving government finances, cooling inflation and forecasts for a change in government after next month’s general election lure inflows. Foreign funds have bought $9.3 billion of local shares and bonds this year, the most among eight Asian markets tracked by Bloomberg.

“The economy has bottomed, and there’s expectation that GDP growth will improve, inflation will come down and that is prompting foreign investors to come in,” Punita Kumar-Sinha, managing partner at Pacific Paradigm Advisors, told Bloomberg TV India today. “People are thinking that if there’s a strong government after the elections, it might be too late to enter.”

State Bank jumped 3.5 percent, taking its gains this past week to 12 percent. Goldman Sachs Group Inc. yesterday advised investors to buy shares and increased its price target by 44 percent. Axis Bank Ltd. rallied to a 10-month high. The S&P BSE India Bankex Index rose to its highest level since May 30. The CNX PSU Bank Index jumped 4.7 percent, the most since Oct. 31.

Bad Loans

Stressed assets, which include bad and restructured loans, amounted to 10.2 percent of total advances by lenders as of Sept. 30, the highest in at least 12 years, the Reserve Bank of India said in a December report. Government-run banks have “distinctly higher stressed advances,” the authority said.

“India’s banking problems are nowhere near the problem in China in terms of potential bad debt,” Arjuna Mahendran, chief investment officer at the wealth management division of Dubai-based bank Emirates NBD PJSC, said on Bloomberg TV India today. Bad debts at Indian lenders “are smaller and manageable and the market is reflecting that.”

Tata Power soared 4.6 percent to its highest level since Jan. 1. Hindalco surged 4.4 percent to 130.90 rupees, taking this month’s gain to 24 percent.

The rupee rose 0.7 percent and touched 59.6850 per dollar, the strongest level since July 30. The currency has rebounded 15 percent from a record low in August as global investors pour money into Indian assets. They bought a net $375.4 million of shares on Thursday, March 27, a 12th day of inflows.

‘Change of Guard’

The opposition Bharatiya Janata Party, favored by investors seeking a change to revive the economy, is leading in opinion polls as voters punish Prime Minister Manmohan Singh’s Congress party for graft scandals, elevated inflation and the slowest economic growth in a decade. Congress is headed for its worst-ever electoral performance, polls show.

“Expectations are pointing toward a change of guard in New Delhi and that will keep the stock market buoyant,” Manish Sonthalia, a fund manager at Motilal Oswal Asset Management Co. in Mumbai, told Bloomberg TV India today. The Sensex may climb at least 5 percent more until the election results are declared on May 16, he said.

The Reserve Bank of India will keep its main repurchase rate unchanged at 8 percent at an April 1 review, according to 29 of 31 economists in a Bloomberg survey. Two see an increase to 8.25 percent. Retail inflation eased to a two-year low in February and wholesale prices rose by the least in nine months, official reports showed.

The Sensex trades at 14.1 times projected 12-month earnings, compared with the average multiple of 14.5 over the past five years. The MSCI Emerging Markets Index is valued at

8.6 times, near the cheapest level since October 2011.

The CNX Nifty Index jumped 0.8 percent to 6,695.90. The India VIX gained 1.4 percent.

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