Indian Stocks Extend Election Rally as Metals, Exporters Climb

Indian stocks rose for a fourth day, with the benchmark index increasing to a record in a volatile trading session, as metalmakers and software exporters advanced.

Copper producer Sesa Sterlite Ltd. climbed to its highest level in 27 months, the best performer on the S&P BSE Sensex. Tractor maker Mahindra & Mahindra Ltd. rallied to an all-time high. Infosys Ltd., rebounding from a seven-month low, led gains among technology companies that were among the worst performers on the Sensex yesterday.

The S&P BSE Mid-Cap Index rose to its highest level since November 2010, and a gauge of small-sized companies rallied to a three-year high, as Narendra Modi’s election victory spurred stocks that benefit most from a stronger economy. Three stocks gained for two that fell on the Sensex, which added 0.1 percent to 24,376.88 after changing direction more than 40 times. The gauge’s 30-day volatility climbed to the highest level in 2014.

“Cyclicals are likely to outperform as we get closer to a recovery,” Ridham Desai, managing director and head of India research at Morgan Stanley, said in an interview to Bloomberg TV India today. “We see more upside in the midcaps than in the large caps.” The Sensex may reach 31,000 in the next 12 months if the new government boosts economic growth through “quick policy response,” he said.

The value of Indian equities has climbed by $412 billion, or 41 percent, to $1.42 trillion since the BJP named Modi as its candidate for prime minister on Sept. 13. That’s helped the country replace Australia in the world’s top 10 stock markets.

Companies likely to benefit most from a revival in the economy have been the biggest gainers. That’s a turnaround from the previous three years, when investors bought defensive shares, such as makers of consumer goods and pharmaceuticals.

Sesa, TCS

Sesa Sterlite surged 7.9 percent and Tata Steel rose 3.6 percent to a two-year high, sending a gauge of metalmakers to its highest level since February 2012. Mahindra jumped the most in two weeks while power-equipment maker Bharat Heavy Electricals Ltd. rallied to its highest in more than two years.

Infosys added 3.6 percent after falling 7.9 percent in the past two sessions. Tata Consultancy Services Ltd. advanced 1.6 percent, the most in a week.

Overseas investors bought a net $242.9 million of Indian shares on May 19, taking this year’s inflow to $7.6 billion, the most among eight Asian markets tracked by Bloomberg.

The Sensex has climbed 15 percent in 2014 and trades at 15.1-times projected 12-month earnings, the most expensive in three years. The MSCI Emerging Markets Index is valued at 10.7 times, data compiled by Bloomberg show.

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