Sensex Jumps to Record as Cyclical Stocks Extend Election Rally

India’s benchmark stock-index climbed to a record, capping a third straight weekly gain, on growing investor confidence that new Prime Minister Narendra Modi will take steps to boost economic growth.

State Bank of India rose to a three-year high after the country’s largest lender by assets posted a smaller-than-forecast decline in fourth-quarter profit. Copper producer Sesa Sterlite Ltd., the best performer on the S&P BSE Sensex this week, rose to its highest level since August 2011. Power-equipment manufacturer Bharat Heavy Electricals Ltd. climbed 3.3 percent, extending a weekly advance to 18 percent.

The Sensex increased 1.3 percent to 24,693.35 at the close in Mumbai, extending this week’s advance to 2.4 percent. India’s strongest electoral mandate in 30 years has put prime minister-in-waiting Modi in a position to pass measures to bolster Asia’s third-biggest economy, spurring stocks that stand to benefit most from accelerating growth. The Sensex has risen 25 percent since Sept. 13, when the opposition Bharatiya Janata Party named Modi as its candidate.

“In our view, cyclical stocks will keep on performing on speculation the economy has bottomed,” Vaibhav Sanghavi, managing director of Ambit Investment Advisors Pvt., said in an e-mail interview.

Election Promises

Modi will be sworn in on May 26. If he delivers on promised policies to tackle corruption, India has the potential to grow about 10 percent annually for the next 20 years, compared with 4.7 percent last year, according to Jim O’Neill, former chairman of Goldman Sachs Asset Management. Modi has also pledged to fight inflation by cracking down on food hoarders, creating a national agriculture market and improving rural infrastructure.

The CNX Nifty Index rose 1.3 percent to 7,367.10, also an all-time high. The S&P BSE Mid-Cap Index rose to its highest level since November 2010, while a gauge of small-sized companies rallied 1.9 percent to a three-year high.

We are “very excited with what has happened in Indian elections and the nation will see a whole new level of development,” Mark Mobius, who oversees about $50 billion as Templeton Emerging Markets Group’s executive chairman, told Bloomberg TV India. “I expect foreign inflows into India to increase on policy reforms.”

State Bank

State Bank surged 9.6 percent after net income dropped 8 percent to 30.4 billion rupees ($519 million) for the three months ended March 31, from 33 billion rupees a year earlier. That compares with the 28 billion-rupee median estimate of 34 analysts surveyed by Bloomberg. Soured debt as a percentage of total lending fell to 4.95 percent, the lowest since March 2013, from 5.73 percent at the end of December.

Bharat Heavy climbed 3.3 percent. Tata Power Co. jumped 6.4 percent to the highest level since January 2013. Sesa Sterlite rose 3.6 percent. Tractor maker Mahindra & Mahindra Ltd. advanced 1.9 percent to a record.

DLF Ltd., India’s biggest housing developer, rose 2.9 percent to a one-year high. The stock has surged 28 percent since Modi’s election victory on May 16.

ITC Ltd. fell 1.4 percent after its fourth-quarter net income of 22.8 billion rupees matched the 22.4 billion rupee median estimate of 28 analysts surveyed by Bloomberg.

Overseas investors sold a net $36.8 million of Indian shares on May 21, the first outflow in 21 days. That pared this year’s purchases to $7.6 billion, still the highest among eight Asian markets tracked by Bloomberg.

The Sensex has climbed 17 percent this year and is valued at 15.3 times projected 12-month earnings, the most expensive in three years. The MSCI Emerging Markets Index is trading at 10.8 times.

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