India Sensex Surges Most in Three Weeks as Global Selloff Eases

  • Foreign inflows to India seen rising as MSCI rejects China bid
  • Aviation stocks soar as international flying rules eased

Indian stocks climbed for the first time in five days as a selloff in Asia eased and investors speculated that foreign buying of the nation’s shares will accelerate after China’s domestic equities were denied entry into MSCI Inc.’s benchmark indexes.

State Bank of India rallied the most on the S&P BSE Sensex after reports the government has approved the merger of five of its associate banks with the lender. Bharti Airtel Ltd., India’s largest mobile-phone operator, gained the most in two weeks after Bank of America Corp. upgraded the stock to buy from neutral. Carriers SpiceJet Ltd. and InterGlobe Aviation Ltd. advanced after the government approved a new aviation policy.

The S&P BSE Sensex jumped 1.3 percent, the most since May 26, to 26,726.34 at the close in Mumbai, ending a four-day, 2.3 percent decline, as Asian and European shares rebounded before the Federal Reserve’s policy review. India will benefit from the non-inclusion of Chinese domestic shares by the MSCI, whose emerging-market index is tracked by investors with $1.5 trillion in assets, according to Arihant Capital Ltd. 

“The majority of funds for emerging markets are allocated to India and China and non-inclusion of China in the MSCI indexes will help India get a higher share of the EM allocation,” Anita Gandhi, a director at Arihant Capital in Mumbai., said by phone.

Foreign investors sold $14 million more Indian shares than they bought on June 14, snapping 14 days of net inflows, data compiled by Bloomberg show. Overseas investors have added $664 million to their holdings this month.

Stocks also gained amid optimism Prime Minister Narendra Modi is getting closer to securing the votes needed to pass one of India’s biggest economic reforms in decades. Finance Minister Arun Jaitley said Tuesday Modi’s government would again seek to pass a constitutional amendment authorizing the goods-and-services tax, known as GST, in the parliamentary session starting next month.

Gati Ltd. rose 1.1 percent, taking this month’s rally to 19 percent. Transport Corporation of India Ltd. climbed 1.3 percent. Aegis Logistics Ltd. added 2.1 percent and IL&FS Transportation Networks Ltd. jumped 4.6 percent to its highest price since April 25.

“The news on GST is very positive as it will boost productivity and has the potential to add as much as 1 percentage point to the economic growth,” Kishor Ostwal, managing director at CNI Research Ltd., an equity research provider, said in Mumbai. “Investors who had gone short, were forced to cover their positions.”

State Bank of India soared 4 percent to its highest since Jan. 6. State Bank of Bikaner & Jaipur and State Bank of Travancore both jumped by the 20 percent daily limit.

Bharti Airtel increased 2.7 percent, the most since June 1. The company is well placed to defend market share and has “inexpensive” valuations, Bank of America said in a report.

SpiceJet climbed 3.5 percent, while InterGlobe Aviation, the operator of India’s biggest airline IndiGo, added 2.1 percent. India’s cabinet passes rules allowing local airlines to fly international routes once they deploy at least 20 aircraft, or 20 percent of capacity on domestic routes, Civil Aviation Minister Ashok Gajapathi Raju said in Twitter posts. The earlier rules mandated domestic airline have at least 20 planes in fleet and have at least 5 years of local operations before they are allowed to fly on international routes.

The Sensex has risen 2.3 percent this year and trades at 16.4 times 12-month projected earnings versus 11.7 for the MSCI Emerging Markets Index.

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