Indian stocks extend rebound; industrials, utilities lead gain

Bloomberg/Mumbai

Indian equities climbed, with the benchmark index completing its biggest three-day gain since September 2011, amid purchases by foreign funds. Industrials and utilities led the advance.

The S&P BSE Sensex rose 0.9% to 19,577.39 at the close in Mumbai, after surging 2.8%, the most in 18 months, on June 28. Reliance Industries, owner of the world’s largest refining complex, reached a five-month high. Engineering firms Larsen & Toubro and Bharat Heavy Electricals added at least 2.6%. Tata Power Co and NTPC, the nation’s biggest generators, gained at least 2.5%.

Indian stocks, bonds and the rupee rallied on June 28 as the government agreed to raise natural-gas prices as part of a policy overhaul to revive an economy that grew at a decade-low rate of 5% in the year ended March 31. Overseas funds bought a net Rs11.2bn of shares that day, ending 13 straight days of outflows, provisional data from BSE show.

“India is still a great long term story and when your currency has appreciated 25% against the rupee it gives a great entry point” for foreign funds, Andrew Holland, chief executive officer at Ambit Investment Advisors Pvt in Mumbai, told Bloomberg TV India.

Reliance, which has the second-highest weighting on the Sensex, advanced 2.7% to Rs885.7, the highest level since February 4. Larsen jumped 3.1% to Rs1,451.65, a two-week high, and Bharat Heavy Electricals surged 2.9% to Rs179.25. Tata Power rose 2.7% to Rs88.65 after the Press Trust of India reported the company raised its tariff 25%. NTPC rallied 3.1% to Rs148.15.

Tata Steel gained 2.5% to Rs280.7. The company plans to raise $1.2bn selling stakes in some affiliated companies and will use the money to repay some of the debt raised for its 2007 purchase of Corus Group, The Sunday Times reported, citing a person it didn’t identify.

The 30-stock Sensex is valued at 13.1 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s 9.8 times. The Indian gauge’s valuation narrowed to 12.46 times on June 24, the cheapest since April.

Today’s gains came after overseas investors pulled $139mn from shares on June 27, a 13th day of net sales and the longest run of outflows in at least five years, data compiled by Bloomberg show. The regulator will release figures for June 28 and July 1 today as banks were closed to the public yesterday.

Foreigners withdrew a net $1.76bn from Indian stocks last month through June 27, the highest since the $2.1bn pulled in August 2011, the data show.

The CNX Nifty Index on the National Stock Exchange of India rallied 1% to 5,898.85. Its July futures settled at 5,892.2. India VIX, which measures the cost of protection against losses in the Nifty, rose 0.8%.

Meanwhile, India’s rupee fell, reversing gains after rising to the highest level in almost two weeks, on speculation investors and importers bought the dollar to benefit from the exchange rate.

State-run banks were seen buying dollars around the 59 per dollar level, said J Moses Harding, executive vice-president at IndusInd Bank in Mumbai. Investors will be watching US jobs data due this week as they seek to gauge the timeline for a paring in US stimulus measures, he said. Non-farm payrolls grew by 165,000 workers in June, after gaining 175,000 in May, according to the median forecast of 70 economists surveyed by Bloomberg before figures due July 5.

“Exporters sold dollars in early trade and then we saw some importers step in to buy dollars later in the day,” Harding said. “The RBI needs to buy dollars too to replenish reserves, and anything stronger than 59 would be a good level to do that.”

The rupee declined 0.2% to 59.5225 per dollar in Mumbai, according to prices compiled by Bloomberg. It touched 58.9650 earlier, the strongest level since June 19, rebounding from an all-time low of 60.7650 touched June 26. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 42 basis points, or 0.42 percentage point, today to 12.09%.

Jeremy Stein, a member of the Federal Reserve’s board of governors, said June 28 officials mulling to start reducing the pace of bond purchases “in, say, September,” should take economic data since the start of the latest quantitative easing programme into account, rather than just the most recent figures.

Three-month onshore rupee forwards fell 0.2% to 60.34 per dollar, according to data compiled by Bloomberg. Offshore non-deliverable contracts gained 0.4% to 60.45.