Indian Stocks Cap Best Quarter Since Modi’s 2014 Election Win

  • Gauge ends four quarters of declines on global rally, reforms
  • Automakers, banks, consumer companies pace gains on index

Indian stocks rose, with the benchmark gauge completing its best quarter since Prime Minister Narendra Modi assumed office two years ago, as the government stepped up measures to bolster growth and global equities recovered from the Brexit vote.

The S&P BSE Sensex surged 1 percent to 26,999.72 at the close, taking its gain since the end of March to 6.5 percent. The advance is the biggest since the 14 percent rally in the period ended June 2014, when Modi won the biggest parliamentary majority in 30 years.

The government in the last two weeks has eased rules on foreign direct investment, approved a new mineral mining policy and a proposal to increase salaries for federal staff. The policy measures have helped soften the impact of the central bank Governor Raghuram Rajan’s impending departure that was announced less than a week before the U.K.’s referendum on membership of the European Union.

“The series of government actions has boosted confidence,” Vikas Gupta, an executive vice president at Arthveda Fund Management Pvt. in Mumbai, said by phone. “Economic recovery has definitely started and the reforms are improving business sentiment.”

Tata Motors Ltd., the biggest truckmaker and owner of Jaguar Land Rover, rose the most in a week. ICICI Bank Ltd. climbed the most in three weeks. Dr Reddy’s Laboratories Ltd. was the top performer on the Sensex. Larsen & Toubro Ltd., the most valuable engineering company, NTPC Ltd., the biggest power producer, and lender Axis Bank Ltd. were the best performers this quarter, with gains of more than 20 percent each.

Wage Hike

Modi’s government Wednesday approved a $13 billion jump in salaries for civil servants, spurring optimism the payout will boost consumption that has been the key driver of the nation’s world-beating growth. The administration also cleared the so-called model shop and establishment bill that allows 24-hour operations for retailers through the year and approved a mineral mining policy.

On June 20, the government eased FDI rules in airlines and defense-equipment makers. The government seeks to pass a constitutional amendment authorizing the goods-and-services tax, known as GST, in the monsoon session of parliament starting July 18.

The Sensex has rebounded 18 percent from the lows reached in February as company earnings recovered after declining in four of the previous five quarters and overseas investors bought shares at the fastest pace in more than a year. Offshore funds have invested $530 million in Indian stocks in June, set for the fourth month of purchases.

Earnings Recover

Sixty six percent of the companies in the NSE Nifty 50 Index posted March-quarter results that exceeded or matched estimates, versus 52 percent in the previous three months. Operating profits increased 9 percent year-on-year in the period, the most since September 2014, data compiled by Bloomberg show.

“Investors can now see the economic recovery in company bottom lines and the macro numbers,” Gupta said. “Demand was missing, which will be taken care of by the salary boost. So, increased demand and a good monsoon will create a positive economic cycle.”

Fertilizer Stocks

Fertilizer companies’ shares rallied on expectations the government will take steps that will enable them to boost working capital, Aditya Jhawar, an analyst at Investec Capital Services India Pvt., said by phone.

Gujarat Narmada Valley Fertilizers & Chemicals Ltd. soared 4.7 percent, extending Wednesday’s 10 percent rally. Gujarat State Fertilizers & Chemicals Ltd. rose the most since June 8, and Gujarat State Fertilizers & Chemicals Ltd. gained 4.3 percent. National Fertilizers Ltd. added 4.9 percent.

The Nifty added 1 percent to 8,287.75 on the last day of June-delivery derivatives. The roll costs, or the price traders pay to replace current month futures with July securities, climbed to 59 basis points of the contract’s value at 4.10 p.m. in Mumbai compared with the six-month mean of 48 basis points. Investors carried over 75 percent of their June contracts to the next month, compared with a six-month average of 70 percent on expiry, data compiled by Bloomberg show.

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