Indian equities rise after worst quarter in five; industrials lead

Bloomberg/Mumbai

Indian equities climbed, with the benchmark index rebounding from its first quarterly drop since December 2011. Industrial stocks led the advance.

The S&P BSE Sensex rose 0.2% to 18,864.75 at the close in Mumbai, with volumes 47% less than the 30-day average. The CNX Nifty index on the National Stock Exchange of India added 0.4%. Larsen & Toubro, India’s largest engineering company, jumped 2.4% after saying it won a Rs56.9bn ($1.04bn) order. Bharat Heavy Electricals rallied 3.1%, the most since December.

The Sensex slid 3% in the three months ended March, its first decline in five quarters, amid the weakest economic growth in a decade, widening deficits and the highest inflation among major emerging markets. India’s manufacturing expansion slowed to a 16-month low in March, a survey showed yesterday.

“A rebound was expected after the weakness we’ve seen of late,” Jitendra Panda, head of broking at Capital First, said by phone yesterday. “For a sustainable rise, the market would need to see some improvement in the macroeconomic situation.”

India’s economy grew 4.5% from a year ago in the final three months of 2012, the weakest pace in almost four years. The statistics bureau predicts an annual expansion of 5% in the year through March, the lowest in a decade.

A gauge of industrial stocks was the biggest gainer among the 10 industry groups of the MSCI India Index yesterday. Larsen climbed 2.4% to Rs1,398.65, the steepest gain since March 6. The company won a contract to set up two coal-fired thermal units in Baran district in the northern state of Rajasthan, an exchange filing showed.

Bharat Heavy, the nation’s largest power-equipment maker, rallied 3.1% to Rs182.50, the most since December 18. The stock sank 22% in the three months ended March 31, the sharpest decline since the quarter ended December 31, 2011. Infosys, India’s second-largest software exporter, rose 1.9% to Rs2,944.2. Dr Reddy’s Laboratories jumped 3.4% to Rs1,825.90, the most in a year.

The Sensex is valued at 12.7 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s multiple of 10.5 times. The 50-stock CNX Nifty index rose 0.4% to 5,704.40 and its April futures settled at 5,726.55. India VIX, which measures the cost of protection against losses in the Nifty, slid 2.4% to 14.85.

Sterlite Industries (India), the nation’s biggest copper producer, tumbled 4.5% to Rs89.50, its lowest close since June 4. The Tamil Nadu Pollution Control Board ordered the company to close its smelter in Tuticorin. The stock was the worst performer on the Sensex.

Foreign funds bought a net $104mn worth of Indian stocks on March 26, extending this year’s purchases to $10.2bn, data compiled by Bloomberg show. Inflows last year totaled $24.5bn, the most among 10 Asian markets tracked by Bloomberg. The market regulator provides data on trades by foreign investors with a day’s lag. Indian markets were closed on March 27 and 29 for public holidays.

There were no trades in India’s bond and currency markets yesterday as banks closed their accounts for the financial year ended March 31. The nation’s stock exchanges are open.

The rupee, which ended last quarter at 54.28 per dollar, may trade between 54 and 55 in the coming weeks as fund inflows into local stocks slow, said J Moses Harding, executive vice-president at IndusInd Bank.

“Trading isn’t happening today due to the account closing,” Mumbai-based Harding said. “Some negativity has entered stock inflows, but debt stays attractive and corporate appetite for offshore loans will be intact as long as the currency is at current levels.”

The rupee gained 0.2% on March 28, taking the first quarter’s advance to 1.3%, data compiled by Bloomberg show. The yield on the 8.15% bond due in June 2022 dropped four basis points, or 0.04 percentage point, to 7.95% the same day, according to the central bank’s trading system. The rate fell nine basis points in the three months through March.