Sensex Climbs to 1-Month High as Tata Steel Rallies With Rupee

  • Steelmakers climb as government considering bailout package
  • Foreign inflows into stocks on March 1 highest in six months

Indian stocks climbed, putting the benchmark gauge on course for its best week in four years, as optimism over federal budget proposals spurred capital inflows and the rupee strengthened for a fifth day.

Tata Steel Ltd. paced a rally among its peers after a top official said the government may consider a bailout package for indebted metal producers. Larsen & Toubro Ltd. and Bharat Heavy Electricals Ltd., the nation’s largest engineering firms, surged more than 6 percent each. Tata Motors Ltd. increased to a one-month high after Jaguar Land Rover U.S. sales increased 25 percent. Dr. Reddy’s Laboratories Ltd. soared the most in six years.

The S&P BSE Sensex jumped 1.5 percent at the close, extending the week’s advance to 6.3 percent, the steepest climb since December 2011. Almost half of 2016’s losses have been erased in the three sessions since Monday’s budget as the most beaten-down industries, including banks, metal and engineering shares, led a comeback. Global funds bought a net $443 million of local stocks on March 1, the biggest single-day inflow since Sept. 15.

“The markets have started stabilizing,” Deven Choksey, managing director of Mumbai-based K.R. Choksey Shares & Securities Ltd., said in an interview to Bloomberg TV India. “Foreign investors are covering positions in the derivatives space, especially in counters where they were perennially short like banks, and that’s why we are seeing a rally.”

Rate Survey

Finance Minister Arun Jaitley in his budget speech announced boosting spending on a rural jobs program and affirmed a goal of cutting the budget deficit gap to 3.5 percent of gross domestic product in the year starting April 1, the smallest in nine years. By sticking to deficit targets, the government has “given the RBI an opportunity to bring down rates, which will give breathing space to metal companies,” Choksey said.

Rate Survey

Finance Minister Arun Jaitley in his budget speech announced boosting spending on a rural jobs program and affirmed a goal of cutting the budget deficit gap to 3.5 percent of gross domestic product in the year starting April 1, the smallest in nine years. By sticking to deficit targets, the government has “given the RBI an opportunity to bring down rates, which will give breathing space to metal companies,” Choksey said.

Twelve of 16 economists surveyed by Bloomberg after the budget expected Reserve Bank of India Governor Raghuram Rajan to lower the benchmark rate by as much as 50 basis points before the April 5 review, while the other four predicted cuts sometime this year.

Bailout Talk

Tata Steel rallied 7.3 percent to its highest since July 7, extending this week’s gain to 16 percent. Steel Authority of India Ltd. added 4.8 percent in a fifth day of gain. Jindal Steel & Power Ltd. jumped 11 percent, the most since Feb. 15.

The steel ministry is working with banks and policy advisers to consider the feasibility of a bailout package for indebted local metal producers, Aruna Sundararajan, the top-most bureaucrat in the steel ministry, said in an interview on Wednesday.

Losses at Indian steelmakers have widened as cheap imports from countries including China forced them to cut prices. The government in September imposed safeguard taxes and set a minimum import price last month.

Tata Motors soared 6.2 percent to its highest since Feb. 5. Dr. Reddy’s surged 5.7 percent, the most since October 2009. Bharat Heavy gained 6.4 percent, paring this year’s drop to 39 percent. Larsen & Toubro added 6.1 percent to its highest level since Jan. 6.

The Sensex has lost 5.8 percent this year as global funds withdrew $2.4 billion from local shares amid a selloff in emerging-market assets. The gauge trades at 15.1 times its 12-month projected earnings, compared with 11.4 times for the MSCI AC Asia Pacific Index.

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