Indian Stocks Advance as Automakers Rally on Monsoon Forecast

  • Seasonal showers will probably be 106% of average, IMD says
  • Mid- and small-cap indexes climb 1 percent as rally spreads

Indian stocks advanced for a second day after forecast of a stronger than usual monsoon rainfall eased concerns about inflation and improved the outlook on company earnings.

Jain Irrigation Ltd. and EPC Industrie Ltd., makers of irrigation equipment, rallied at least 6 percent. Hero MotoCorp Ltd. and Bajaj Auto Ltd., the largest two-wheeler producers, rose more than 1 percent, while Maruti Suzuki India Ltd., the biggest carmaker, climbed to a one-week high. GAIL India Ltd. soared the most on the S&P BSE Sensex after saying it got bids from two groups to transport shale gas to India from the U.S.

The Sensex gained 0.5 percent at the close, adding to Monday’s 1.4 percent advance. The monsoon may be above average for the first time since 2013, the weather office said on Tuesday, joining forecaster Skymet Weather Services Pvt. in predicting stronger showers. Back-to-back rain shortfall last year dried rural demand, which contributed to the drop in Sensex company earnings in four of the last five quarters.

“A good monsoon drives agricultural growth and leaves farmers with more money to spend, which in turn improves earnings of companies linked to the rural economy,” said Purvesh Shelatkar, senior vice president and head of equity at BOB Capital Markets Ltd. in Mumbai. BOB is bullish on State Bank of India, Maruti and Tata Motors Ltd., and maker of auto parts including Amara Raja Batteries Ltd. and Motherson Sumi Systems Ltd., he said.

Monsoon Outlook

Showers during the June-September monsoon season will probably be 106 percent of the mean of about 89 centimeters (35 inches) as the El Nino weather pattern that brings dry weather weakens, the India Meteorological Department said after market hours Tuesday. Rains may be 105 percent of the average, Skymet said Monday.

Investors are also awaiting monthly inflation and industrial data. Consumer prices may have risen 5 percent from a year ago in March, from 5.2 percent in February, a Bloomberg survey showed before government data due Tuesday after market hours. The central bank lowered its key interest rate to a five-year low this month and said it would look for more room to ease as it watches monsoon rains.

Jain Irrigation surged 6.1 percent, the most since Feb. 18. EPC soared 7.5 percent to its highest level since Feb. 22. Kaveri Seed Co. added 3.3 percent, while Avanti Feeds Ltd. jumped 12 percent, the most since Aug. 10.

Hero MotoCorp advanced 2.5 percent to its highest level since December 2014. Bajaj Auto gained 1.1 percent. Escorts Ltd., a tractor and two-wheeler maker, surged the most since Aug. 27. Maruti Suzuki had the steepest gain since March 9. Ashok Leyland Ltd. increased to a record. Tata Motors rallied 2.4 percent to its highest price this year.

GAIL surged to its highest level since Jan. 11. Gail had tendered for transporting the gas starting 2017-18, people with knowledge of the process said, declining to be identified as the deal hasn’t been finalized. The tender documents say supplies from Louisiana’s Sabine Pass project are expected to commence in March 2018 and deliveries from Maryland’s Cove Point terminal in December 2017.

Oil & Natural Gas Corp., the largest state-owned explorer, added 1.8 percent. ICICI Bank Ltd., the country’s biggest private lender, climbed 1.8 percent percent.

Factory output may have expanded 0.6 percent from a year earlier in February, compared with a 1.5 percent decline in January, according to another survey.

Global funds bought $23.5 million of Indian shares on Monday, taking the year’s inflow to $1.1 billion.

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