India’s Sensex Jumps Most in 2 Weeks as Construction Shares Rise

Indian stocks rose the most in two weeks, paced by construction companies, as the government pledged to increase investment to build roads and a manufacturing gauge climbed to a two-year high.

Larsen & Toubro Ltd., the biggest engineering company, jumped the most in two weeks, while Ashoka Buildcon Ltd., a builder of roads, ports and bridges, climbed to a five-month high. Tata Motors Ltd., the owner of Jaguar Land Rover, gained for a third day. ICICI Bank Ltd. rose to a record as a two-day meeting of bank chiefs and regulators started in Pune.

The S&P BSE Sensex rallied 1.4 percent to 27,887.90 at the close in Mumbai, capping a six-day streak, the longest in four months. The government increased excise duty on petrol and diesel by 2 rupees (3 U.S. cents) a liter to raise money for 15,000 kilometers of roads, according to a statement yesterday.

“2014 was the year of intent and induction and 2015 is going to be the year of implementation,” Nilesh Shah, managing director at Mumbai-based Envision Capital Ltd., said in an interview with Bloomberg TV India today. Prime Minister Narendra Modi’s government, which came to power in May after the nation’s biggest election victory in three decades, “has taken six months to really understand what needs to be done. 2015 is going to the year when all of that is going to be put to work.”

India’s manufacturing Purchasing Managers’ Index rose to 54.5 in December, the highest since December 2012, from 53.3 in November, according to data released today by HSBC Holdings Plc and Markit Economics. A reading above 50 indicates an expansion.

The 50-stock CNX Nifty Index advanced 1.4 percent to 8,395.45, also capping a sixth day of gains. The VIX Index, a gauge of protection against stock market swings using options, slumped 8.2 percent to 13.80, the lowest close since Dec. 12.

Draghi, Modi

Indian stocks extended gains as the euro fell to a 4 1/2-year low and Spanish and Italian bonds rose amid speculation the region’s central bank will boost stimulus. European Central Bank President Mario Draghi said he can’t exclude the risk of deflation, hinting that the likelihood of large-scale quantitative easing is rising.

Indian state-run lenders will be the focus of a gathering of bank chiefs and regulators from today as they seek to reverse companies’ lowest profitability in at least nine years.

Modi, Finance Minister Arun Jaitley, central bank Governor Raghuram Rajan and the heads of state-run banks will meet in Pune, near Mumbai, to discuss ways to boost corporate earnings and capital ratios, according to Reliance Securities Ltd.

Road Construction

Larsen & Toubro Ltd. added 2.1 percent, extending last year’s 40 percent rally. Ashoka Buildcon rose 8.1 percent, after gaining as much as 10 percent to an intraday record. Man Infraconstruction Ltd. jumped 17 percent.

Modi’s administration last week issued an executive order to make it easier for companies to buy land, aimed at spurring infrastructure development in rural areas. The order came after more than 1 trillion rupees of projects were stalled, including 600 billion rupees of roads.

ICICI Bank, the biggest private-sector lender, jumped 2.8 percent. State Bank of India, the nation’s largest lender by assets, advanced for a fourth day.

Tata Steel Ltd., India’s top producer of the alloy, added 1.6 percent to reach a three-week high. The company restarted one of its biggest iron ore mines in eastern India, four months after it was ordered to suspend operations pending lease renewal, officials familiar with the matter said.

Tata Motors surged 2.7 percent, the most since Nov. 17, after its December passenger vehicle sales jumped 30 percent. Bharat Heavy Electricals Ltd., India’s biggest power-equipment maker, added 2.5 percent, capping a gain each day of this week.

International investors bought a net $87.6 million of local shares on Dec. 31, taking their total purchases in 2014 to $16.1 billion, the second-most in Asia, after Japan.

The Sensex rallied 30 percent in 2014, the most among the world’s 20 biggest markets after China. The gauge is valued at 15.3 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s multiple of 11.1.

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