India Stocks Cap Best Week Since March as Results Lift Sentiment

Updated on
  • State Bank jumps as gross bad-debt ratio smaller than peers
  • HPCL, BPCL rise to records; L&T has best week since May 2009

India’s benchmark stock index completed its biggest weekly advance since March after better-than-expected earnings from some of the country’s biggest companies bolstered investor sentiment amid increases in global equities.

State Bank of India rallied the most in three months amid optimism that the worst may be over for the nation’s largest bank after Chairman Arundhati Bhattacharya said most the troubled assets have been recognized. Refiners Bharat Petroleum Corp. and Hindustan Petroleum Corp. surged to records after their profits beat estimates. Larsen & Toubro Ltd. was the top performer this week after it forecast sales to rise this year.

The S&P BSE Sensex jumped 1.1 percent at the close in Mumbai, taking the weekly gain to 5.3 percent. Thirteen out of 24, or 54 percent, of Sensex posted that have reported March-quarter results have beaten or matched estimates. That compares with 53 percent in the December quarter, data compiled by Bloomberg show. Forecasts for above-average rain after back-to-back droughts added to the optimism about the nation’s equities.

“Improving global risk appetite, better company earnings and the monsoon forecast have boosted sentiments,” said Chokkalingam G., managing director at Equinomics Research & Advisory Pvt. in Mumbai. “It’s raining good news for investors. This rally was long due." He’s bullish consumer goods companies and medium-sized software exporters.

Monsoon Outlook

Company earnings are recovering after falling in four of the last five quarters, which was the worst run since the financial crisis. Showers in the June-September season starting June 1 are seen at 109 percent of the mean of about 89 centimeters (35 inches), more than the 105 percent predicted in April, Skymet Weather Services Pvt., a New Delhi-based private forecaster, said Tuesday. That’s more than the quantum forecast by the state weather office and would be the highest since 1994.

State Bank soared 6.4 percent to its highest level since April 27, taking the week’s gain to 14 percent. The lender reported the sharpest fall in profits in five years as provisions for bad loans surged. Gross non-performing assets for the March quarter were at 6.5 percent versus 5.1 percent in the three months ended December. Other state-run banks, including Bank of Baroda, have reported ratios in the 10 percent to 15 percent range.

Bad-Loan Ratio

“SBI’s gross NPA ratio was much lower than its peers," Purvesh Shelatkar, senior vice president and head of equities at BOB Capital Markets Ltd., said by phone from Mumbai. “Some investors were expecting the ratio to widen as much as the bank’s peers. They were forced to cover their short positions” after earnings were announced, he said.

Bharat Petroleum jumped the most since January 2013 to a record. India’s second-largest fuel retailer posted net income of 25.5 billion rupees, exceeding the 19.1 billion-rupee estimate. Gross refining margin was at $6.3 a barrel and significantly above expectations, said Bhavin Gandhi, an analyst at Batlivala & Karani Securities Pvt.

Hindustan Petroleum had the biggest gain since June 2010, after reporting fourth-quarter net income of 15.5 billion rupees that exceeded the estimate of 10.9 billion rupees.

Foreigners bought $107 million of domestic stocks on May 26, taking the month’s inflow to $226 million. They bought $585 million of shares in April and $4.1 billion in March, which was the most in three years.

The Sensex has climbed 2.1 percent this year and trades at 16.4 times 12-month forward earnings. That compares with 11.6 times for the MSCI Emerging Markets Index.