India’s Sensex Posts Best Quarter Since 2009 on Budget Outlook

Indian shares advanced, with the benchmark stock gauge posting the steepest quarterly gain among global indexes, amid speculation Prime Minister Narendra Modi’s first budget will outline measures to strengthen the economy.

The S&P BSE Sensex rose 1.3 percent to 25,413.78 at the close in Mumbai, paced by banks and energy companies. ICICI Bank Ltd. gained the most in four weeks. Oil & Natural Gas Corp., the country’s largest explorer, added 3.1 percent. Sun Pharmaceutical Industries Ltd. climbed to a record.

The benchmark gauge soared 14 percent during the quarter, the biggest increase since the period ended September 2009 and the most among the world’s 40 largest markets, as the nation received the second-largest foreign fund inflows in Asia this year. Investors are focused on the federal budget, due to be presented on July 10, after India raised railway passenger and freight fares this month. Modi has said he’s ready to take unpopular steps to improve the nation’s fiscal health.

“The pre-budget rally is on and the overall view is very positive,” D.K. Aggarwal, New Delhi-based chairman of SMC Investments & Advisors Ltd., which manages more than $100 million of Indian shares, said in a phone interview. “The expectation among investors is that the Modi government will take bold reform to boost economic growth.”

Relative Valuation

The Sensex has gained 29 percent since Sept. 13, when the then opposition Bharatiya Janata Party named Modi its candidate for prime minister. Modi, who has vowed to revitalize the $1.8 trillion economy, was sworn in on May 26 after the BJP won India’s biggest electoral victory in three decades.

The CNX Nifty Index on the National Stock Exchange of India Ltd. advanced 1.4 percent to 7,611.35. ICICI Bank Ltd. gained 2.4 percent, while State Bank of India, the nation’s largest lender, increased 1.9 percent. Sun Pharmaceutical jumped 4.1 percent, the top gainer on the Sensex. Dr Reddy’s Laboratories Ltd. climbed 2.4 percent.

Oil & Natural Gas extended its advance this year to 47 percent. Indian Oil Corp. increased 3.6 percent. Bharat Petroleum Corp. and Hindustan Petroleum Corp. added at least 4.8 percent.

The Sensex trades at 15.6 times projected 12-month profits, near the most expensive level in more than three years. That compares with the MSCI Emerging Markets Index’s multiple of 11.

Overseas investors sold a net $86.8 million of Indian shares on June 26, paring this year’s inflows to $9.88 billion. That’s the largest amount among the eight Asian markets tracked by Bloomberg after Taiwan.

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