People shop for clothes at a roadside store at a market in Mumbai yesterday. Indian stocks climbed to their highest level in 14-months after the government raised diesel prices for the first time in more than a year
Bloomberg/Mumbai

Indian stocks climbed to their highest level in 14-months after the government raised diesel prices for the first time in more than a year and the US Federal Reserve announced a third round of stimulus measures.
The BSE India Sensitive Index, or Sensex, rose 2.5% to 18,464.27, its highest close since July 26, last year. Lenders and metal producers led the rally, with 10 of the 30 stocks on the gauge surging more than 4% each. Reliance Industries, owner of the world’s largest refining complex, advanced to a seven-month high. State Bank of India soared 5.6%.
The diesel-price increase, the first since June 2011, will bolster government finances and may increase the chance the Reserve Bank of India will ease monetary policy.
Indian stocks also gained from a rally in global equities after the US Fed said yesterday it will undertake open-ended purchases of $40bn of mortgage debt a month as it seeks to boost growth and lower unemployment. The Fed’s move followed ECB President Mario Draghi’s earlier statement that the bank has agreed to an unlimited bond-purchase programme.
The MSCI Asia Pacific Index surged 2.4 %. Futures on the Standard & Poor’s 500 Index gained 0.5% after the index yesterday rallied to its highest level since 2007, while the S&P GSCI Index of 24 commodities reached a five-month high.
The diesel-price change will help cut revenue losses of $3.7bn at state-owned refiners and lower the government’s subsidy costs as it seeks to curb spending. The refiners sell fuels at below market prices to curb inflation, and are partly compensated by cash payments from the government and discounts on crude by state-run explorers.
“Indian Oil Corp, the largest refiner, dropped 2.3% to Rs248.80, and Bharat Petroleum Corp, the second-biggest state-run refiner, lost 1.3% to Rs350.20.Hindustan Petroleum Corp declined 2.5% to 300.20.
Pantaloon Retail India the top supermarket operator, led its peers higher after a report said the government may decide today to allow foreign investment in multi-brand retail.
Pantaloon surged 7.1%, the biggest gain since June 6, to Rs157.90. Shoppers Stop Ltd rose 1.2 % to Rs356, the highest since August 27, and Trent Ltd increased 3%, after CNBC-TV18 reported the government may ease rules on overseas ownership of stores selling more than one brand, citing sources it didn’t identify.
Jet Airways (India) Ltd, the biggest carrier, gained 2.1 % to Rs368.65, its seventh day of advance. Budget carrier SpiceJet Limited soared 4.4 % to Rs34.50. Kingfisher Airlines Ltd surged 7.5 % to 10.80.
Reliance Industries soared 5.3 % to Rs841.75, its highest level since February 21. ICICI Bank jumped 5.1 % to Rs1,008. State Bank of India advanced 5.6 % to Rs1,971.5 Larsen & Toubro the largest engineering company, added 5.1 % to Rs1,490.
The Sensex is valued at 14.6 times estimated earnings, compared with the MSCI Emerging Markets Index’s 11.4 times.
The S&P CNX Nifty Index jumped 2.6% to 5,577.65 and its September futures settled at 5,584.90. The India VIX, which gauges the cost of protection against losses in the Nifty, fell 1.9% to 15.38. The BSE-200 Index increased 2.2% to 2,231.92. The National Stock Exchange of India Ltd and BSE Ltd traded 743mn shares yesterday, 16% less than the 12-month daily average of 880mn.