Sensex world’s best performer this year

India’s benchmark stock index rose to become the world’s best performer this year after the central bank cut lenders’ reserve-requirement ratios for the first time since 2009 and signalled future rate cuts.The BSE India Sensitive Index, or Sensex, jumped 1.5% to 16,995.77 at 3.30pm in Mumbai, its highest close since November 14. The measure has risen 17% this year in dollar terms, the most among 91 indexes tracked by Bloomberg. The BSE Bankex Index gained 3.2%, set for its best month since May 2009. The BSE Capital Goods Index, which slumped by half in 2011, climbed to two-month high. The BSE Realty Index rose to its highest level since November 14.“The rally may sustain because the massive gap between last year’s outperformers, like consumer goods and healthcare stocks, and underperformers, like capital goods, metals and real estate companies, has to be bridged,” Sadanand Shetty, senior fund manager at Taurus Asset Management Co, which has about $921mn in assets, said by phone from Mumbai. The cut in the reserve ratio may be followed by a reduction in interest rates in the next policy review, he said.The Sensex plunged 25% last year on concern a weak rupee and seven interest-rate increases will worsen the effects of Europe’s crisis on earnings. It trades at 15 times estimated profit, down from 19.4 times at end of 2010. The MSCI Emerging Markets Index is valued at 10.1 times.The Reserve Bank of India reduced the cash reserve ratio to 5.5% from 6%, seeking to add about Rs320bn ($6bn) into banks. Brazil, China and Russia have cut funding costs or reduced lenders’ reserve requirements amid Europe’s debt crisis. The rupee rose past 50 a dollar for the first time since November as the central bank left borrowing costs unchanged today to support economic growth.The rupee was little changed at 50.0675 per dollar in Mumbai, compared with 50.0825 on Monday, according to data compiled by Bloomberg. It rose as much as 0.3% to 49.9250 earlier, the strongest level since November 14.Foreign funds boosted holdings of Indian debt by $3.4bn this month through January 20 to $29.4bn and investments in stocks rose by $1.4bn, exchange data show.The rupee fell 16% in 2011, the worst performance among Asia’s 10 most-traded currencies. It has rebounded 6% this year to be the region’s biggest gainer on central bank intervention, regulatory changes and better global risk appetite, according to Brown Brothers Harriman and Co.