A pedestrian walks past a Mumbai Police security vehicle outside the Bombay Stock Exchange. The Sensex increased 1.3% to 24,693.35 points at the close, extending this week’s advance to 2.4%.
India’s benchmark stock-index climbed to a record, capping a third straight weekly gain, on growing investor confidence that new Prime Minister Narendra Modi will take steps to boost economic growth.
State Bank of India rose to a three-year high after the country’s largest lender by assets posted a smaller-than- forecast decline in fourth-quarter profit. Copper producer Sesa Sterlite, the best performer on the S&P BSE Sensex this week, rose to its highest level since August 2011. Power- equipment manufacturer Bharat Heavy Electricals climbed 3.3%, extending a weekly advance to 18%.
The Sensex increased 1.3% to 24,693.35 at the close in Mumbai, extending this week’s advance to 2.4%. India’s strongest electoral mandate in 30 years has put prime minister- in-waiting Modi in a position to pass measures to bolster Asia’s third-biggest economy, spurring stocks that stand to benefit most from accelerating growth. The Sensex has risen 25% since September 13, when the opposition Bharatiya Janata Party named Modi as its candidate.
“In our view, cyclical stocks will keep on performing on speculation the economy has bottomed,” Vaibhav Sanghavi, managing director of Ambit Investment Advisors, said in an e-mail interview.
Modi will be sworn in on May 26. If he delivers on promised policies to tackle corruption, India has the potential to grow about 10% annually for the next 20 years, compared with 4.7% last year, according to Jim O’Neill, former chairman of Goldman Sachs Asset Management. Modi has also pledged to fight inflation by cracking down on food hoarders, creating a national agriculture market and improving rural infrastructure.
The CNX Nifty Index rose 1.3% to 7,367.10, also an all-time high. The S&P BSE Mid-Cap Index rose to its highest level since November 2010, while a gauge of small-sized companies rallied 1.9% to a three-year high.
We are “very excited with what has happened in Indian elections and the nation will see a whole new level of development,” Mark Mobius, who oversees about $50bn as Templeton Emerging Markets Group’s executive chairman, told Bloomberg TV India. “I expect foreign inflows into India to increase on policy reforms.”
State Bank surged 9.6% after net income dropped 8% to 30.4bn rupees ($519mn) for the three months ended March 31, from 33bn rupees a year earlier. That compares with the 28bn-rupee median estimate of 34 analysts surveyed by Bloomberg. Soured debt as a percentage of total lending fell to 4.95%, the lowest since March 2013, from 5.73% at the end of December.
Bharat Heavy climbed 3.3%. Tata Power Co jumped 6.4% to the highest level since January 2013. Sesa Sterlite rose 3.6%. Tractor maker Mahindra & Mahindra Ltd advanced 1.9% to a record.
DLF, India’s biggest housing developer, rose 2.9% to a one-year high. The stock has surged 28% since Modi’s election victory on May 16.
ITC Ltd fell 1.4% after its fourth-quarter net income of 22.8bn rupees matched the 22.4bn rupee median estimate of 28 analysts surveyed by Bloomberg.
Overseas investors sold a net $36.8mn of Indian shares on May 21, the first outflow in 21 days. That pared this year’s purchases to $7.6bn, still the highest among eight Asian markets tracked by Bloomberg.
The Sensex has climbed 17% this year and is valued at 15.3 times projected 12-month earnings, the most expensive in three years. The MSCI Emerging Markets Index is trading at 10.8 times.
Rupee falls slightly
The Indian rupee retreated from an 11-month high to fall yesterday as the central bank stepped in to temper gains being sparked by continued expectations of robust foreign inflows and a rally in domestic shares.
The currency still rose 0.4% for the week, posting its fourth straight weekly gain and its longest winning streak in 16 months on hopes the Bharatiya Janata Party’s landslide win last week would bring a new government willing to undertake substantial economic reforms.
Earlier in the day, JP Morgan said it expects the rupee to test 57 per dollar in the next three months, calling Modi’s win “a more transformational outcome for India macro than most could have imagined.”
However, the Reserve Bank of India was spotted buying dollars through state-run banks after the rupee hit its session high, traders said, and continued intervention is likely to cap gains in the rupee.
“The central bank would not let the rupee appreciate beyond a certain level and that is holding it back. We will have consistent FII (foreign institutional supply) supply coming and rupee will be held in a range of 58 to 59,” said Ashtosh Raina, head of forex trading, HDFC Bank.
The partially convertible rupee closed at 58.52/53 per dollar, after gaining as high as 58.33 intraday, its strongest against the dollar since June 18.
It closed at 58.4675/4775 on Thursday.