India's Sensex Reaches Record High as State Bank of India Surges

  • State-run lenders closer to peak of bad loans: Nomura
  • Investors to focus on earning seasons, progress of monsoon

India’s stocks benchmark rose as the country’s largest lender by assets, State Bank of India, advanced for a second day on optimism the bad-loan problem for state-run lenders has peaked.

The S&P BSE Sensex climbed 0.4 percent to a record 31,369.34 in Mumbai. State Bank of India was the top performer, by gaining 2.2 percent, the most in more than a month. Nine out of the 13 sub-indexes compiled by BSE Ltd. gained, paced by a gauge of real estate companies.

“Our analysis suggests that large public-sector banks have taken significant recognition and we are closer to the peak of the non-performing assets cycle,” Adarsh Parasrampuria and Amit Nanavati, analysts with Nomura jointly wrote in an investor note. With risk-reward “turning favorable” for Punjab National Bank, Nomura upgraded it to a buy from neutral.

Investors also got bullish signals from two different data releases. The government said Thursday the amount of monsoon rainfall has been 5 percent more than normal since the season started last month. And exchange data showed foreign funds’ open interest, or number of contracts outstanding in value terms, rose 1.2 percent to about 1.5 trillion rupees ($23 billion) Wednesday.

“The next triggers will be the first-quarter earnings, and the progress of monsoon,” said Gaurang Shah, head investment strategist at Geojit Financial Services Ltd. in Mumbai. “Banking stocks are benefiting from decisive moves from the government and the central bank to resolve the problem of bad loans.

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