India’s Sensex Ends Three-Day Drop as Lenders, Carmakers Rally

India’s benchmark stock index rallied for the first time in four days led by shares of lenders and automakers.

Tata Motors Ltd., the owner of Jaguar Land Rover, soared the most in five months. ICICI Bank Ltd., the country’s second-biggest lender, advanced to its highest level since November 2010. Tata Consultancy Services Ltd., India’s largest software exporter, led an advance among peers after profit in the last quarter rose 51 percent.

The S&P BSE Sensex jumped 1.6 percent to 22,628.84 at the close in Mumbai, erasing the weekly loss. Indian markets are closed tomorrow for the Good Friday holiday. The gauge fell for three consecutive days after climbing to a record on April 10.

“The market is continuing its run after some profit booking,” V.K. Vijayakumar, an investment strategist at Geojit BNP Paribas Financial Services Ltd. in the southern Indian state of Kerala, said in a phone interview today. “Some investors had gone short, and now may have been forced to cover. Thus we saw such a sharp bounce-back.” He expects indexes to rally at least 10 percent if a strong government comes to power after election results are announced May 16.

The Sensex is the best performer among the largest emerging markets this year on expectations a victory by the opposition Bharatiya Janata Party will produce a government with a mandate to spur economic growth. Overseas investors have bought a net $4.8 billion of local shares this year, the most in Asia, data compiled by Bloomberg show.

Elections, Inflation

Several opinion polls have projected the coalition led by the BJP will win the general election for the 543-seat lower house of India’s parliament. For the first time, a poll earlier this week found that the coalition may win an outright majority.

India’s elections, the world’s biggest-ever exercise in democracy, began on April 7 and will end on May 12 after nine phases of voting. Counting will take place on May 16.

Investors may have been prompted to sell shares over the past three days after data showed inflation accelerated and factory output declined, according to CNI Research Ltd.

India’s wholesale-price index rose 5.7 percent in March, the most in three months, official figures released April 15 showed. Consumer prices climbed 8.31 percent in March from a year earlier, government data showed. Industrial production contracted 1.9 percent in February from a year earlier, the biggest slide since May, separate data showed on April 11.

Reserve Bank of India Governor Raghuram Rajan has raised the benchmark interest rate 75 basis points since taking charge in September to curb price rises. The next policy review is due June 3.

Tata Motors, ICICI

Tata Motors rallied 4.4 percent, the most since Nov. 14. Mahindra & Mahindra Ltd., India’s largest maker of sport-utility vehicles and tractors, rose 2.1 percent, ending a four-day decline.

ICICI Bank added 3.3 percent to its highest level since Nov. 5, 2010. State Bank of India Ltd., the nation’s biggest lender, increased 3 percent, the most since April 9.

Tata Consultancy gained 1.2 percent. The company reported after markets closed yesterday that net income jumped 51 percent in the three months ended March 31. Infosys Ltd., the second-biggest software services exporter, forecast on April 15 full-year sales growth that beat analysts estimates, while Wipro Ltd. may report today net income rose more than 20 percent.

Infosys gained 1.1 percent, while Wipro added 2.4 percent.

TCS, Wipro

Tata Consultancy profit rose to 53 billion rupees ($879 million), compared with the 52.4 billion-rupee median estimate of 39 analysts surveyed by Bloomberg. The company predicts growth will be stronger this year as customers in the U.S. and Europe, as well as the Asia Pacific region, outsource more work.

Wipro, the country’s third-largest software services company by market capitalization, reported after the close of trading today that profit rose 29 percent to 22.3 billion rupees in the last quarter, beating estimates of 21 billion rupees.

“We are in a massive bull run for the next four years, said B.P. Singh, chief investment officer for equities at Pramerica Asset Managers Pvt. Higher corporate profits are driving the rally, he said.

The Sensex has risen 6.9 percent so far in 2014 and trades at 14.3 times projected 12-month profits, in line with the average multiple over the past five years. The MSCI Emerging Markets Index has gained 0.3 percent in 2014 and is valued at 10.5 times.

Overseas investors sold a net $15.4 million of Indian shares on April 15, a second day of sales and the first consecutive outflow since February.

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