Stock traders rejoice as the Sensex gained 0.9% to 28,446.12 points yesterday, the highest close since April 16.
Bloomberg/Mumbai
Indian stocks rallied to a three-month high as lenders climbed after the government said it is considering changes to foreign investment rules. Energy companies gained amid lower crude prices.
Axis Bank jumped the most since May, while Yes Bank had the steepest climb in three weeks. Kotak Mahindra Bank and HDFC Bank rallied to records. Reliance Industries, owner of the world’s largest refining complex, advanced to its highest since September 9. Tata Power Co added 2.4%.
The S&P BSE Sensex gained 0.9% to 28,446.12, the highest close since April 16, while a measure of medium-sized companies reached a record. Foreign direct and portfolio inflows will be combined with investments by expatriate Indians under a common cap for sectors, Finance Minister Arun Jaitley said yesterday. The move simplifies procedures and leaves room for further stake purchases by overseas investors.
“It’s a practical initiative that the government has taken as there’s no reason to have a cap on how much shareholding can come through FII or through FDI,” Keki Mistry, chief executive officer at Housing Development Finance Corp, said in an interview to Bloomberg TV India. The policy “helps foreign investments,” he said.
The Sensex has risen 2.8% so far this week, set for the biggest gain in four weeks, as Greece’s agreement with its creditors boosted demand for emerging-market stocks. Foreigners are net buyers of Indian shares this month for the first time since April.
The new measures come against the backdrop of an increase in spending by Prime Minister Narendra Modi’s government. The planned spending in April-May was 13.4% of the amount budgeted for the year ending March 2016, compared with 10.4% in the same period last year.
An increase in tax revenue has given Modi ammunition to boost expenditure. Indirect tax receipts jumped 37% in May from a year earlier, the most since 2011. The 45% drop in Brent crude prices over the past year has meant that India, which buys about three-quarters of its oil, is saving money that would normally go toward subsidies.
“India is on a relatively much better wicket and that is what is going to drive inflows to this market,” R Sreesankar, head of institutional equities at Prabhudas Lilladher Pvt in Mumbai, said in an interview to Bloomberg TV India yesterday. “The incremental liquidity is coming here.”
Axis rallied 4.2%, the most on the Sensex. Yes Bank gained 3.2% and Kotak Mahindra Bank jumped 4.1%. HDFC Bank added 1.6%, while HDFC rose 1.5%.
“Composite caps should be positive for Axis, Kotak and Yes Bank as it would lead to increased weighting or inclusion in various MSCI indices, leading to $150mn inflows into these stocks,” Chakri Lokapriya, the Mumbai-based chief investment officer at TCG Advisory Services, which manages about $3bn in assets worldwide, said by phone.Reliance Industries advanced 1.2%. Tata Power rose for a fourth day.
Foreigners bought a net $70mn of domestic stocks on July 14, extending the year’s inflow to $6.9bn. They’ve purchased $680mn of local shares so far this month after a combined net outflow of more than $1bn in May and June, data compiled by Bloomberg show.The Sensex has risen 3.4% this year and trades at 15.8 times projected 12-month profits. The MSCI Emerging Markets Index is valued at a multiple of 11.6.
Meanwhile, India’s rupee retreated after the nation’s exports fell for a seventh month and the Federal Reserve said it’s on track to raise interest rates this year.
Overseas shipments contracted 15.8% from a year earlier in June, the longest stretch of declines since 2009, official data showed after the close of markets on Wednesday. Imports dropped 13.4%. A gauge of dollar strength rose to a three-month high yesterday after Fed Chair Janet Yellen reiterated that US borrowing costs will rise this year, a move that could reduce the allure of emerging-market assets.
“The broad rally in the dollar is weighing on the rupee as well,” said Rohan Lasrado, the Mumbai-based head of foreign- exchange trading at RBL Bank Ltd. The Reserve Bank of India is likely to support a weaker currency to aid exports, he said.
The rupee dropped for a second day, falling 0.1% to 63.5150 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. The yield on the 10-year sovereign bonds rose one basis point to 7.85%, prices from the central bank’s trading system show. It has risen five basis points this week.
