Sensex climbs; rupee strengthens further

Bloomberg/MumbaiIndian stocks rose for a second day, paring a weekly loss, as the nation’s second-largest software exporter reported profit that beat estimates and global stocks rallied.Infosys rallied the most in three months after the company maintained its annual sales forecast. The stock now has the highest weighting on the S&P BSE Sensex, up from a third place yesterday. Hindustan Unilever climbed to a record, while drugmakers Dr Reddy’s Laboratories and Cipla were among the best performers on the benchmark index.The Sensex gained 0.7% to 27,458.38 at the close, paring the weekly loss to 1.5%. Net income at Infosys rose 13% to Rs32.5bn ($521mn) in the December quarter, exceeding the Rs31.6bn median of 29 analysts’ estimates in a Bloomberg survey. The Bengaluru-based company kept its forecast for full-year sales to rise 7% to 9% in US dollar terms.“Spending on technology has improved dramatically, and the guidance given by Infosys is conservative,” Trip Chowdhry, a US-based analyst at Global Equities Research, said in an interview to Bloomberg TV India yesterday. “Infosys can easily meet or beat the top-end of its guidance.”Profits at 67% of the 30 Sensex companies beat or matched analyst estimates in the September quarter, versus 46% in the three months ended June and 60% in March, data compiled by Bloomberg show. Earnings are likely to rise 27% over the next year, versus 11% for companies on the MSCI Emerging Markets Index, the data show.Infosys jumped 5.1%, the steepest climb since October 10. The stock had lost as much as 3.1% today before the results. Tata Consultancy Services increased 2.8%, the most since December 16. The companies were among the best performers on the Sensex yesterday.Hindustan Unilever soared 5.8%, taking this week’s rally to 14%, the most since the week ending May 5, 2013. Brokerages including JPMorgan Chase & Co, Credit Suisse Group, Kotak Securities and IIFL Holdings have raised their ratings on the stock this week.“The fast-moving consumer goods pack is being rerated and Hindustan Unilever is the benchmark of the sector,” said Harsh Mehta, an analyst at brokerage HDFC Securities. “There may also be some flight to safety that’s benefiting the stock.”Dr Reddy’s jumped 3.2%, the most since November 7, and Cipla gained 2.3%, the steepest advance since December 18.The Sensex rallied 30% in 2014, the most among the world’s 20 biggest markets after China. Foreigners bought $16bn of stocks on expectations economic growth will rebound after Prime Minister Narendra Modi won the biggest electoral mandate in three decades in May.Global investors sold a net $62mn of local shares on January 8. The Sensex is valued at 15.2 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s multiple of 11.2, data compiled by Bloomberg show.Meanwhile the rupee completed its biggest weekly gain since May on optimism demand for emerging-market assets will be sustained amid the prospect of further euro-area stimulus.European Central Bank President Mario Draghi said this week that policy makers may undertake measures including buying sovereign bonds to spur growth. Minutes of the Federal Reserve’s December meeting released January 8 showed the US is unlikely to raise interest rates before late April. Global funds bought a record $26.4bn of Indian debt in 2014, while pouring about $16bn into the nation’s stocks, exchange data show.The rupee climbed 1.6% from January 2 to close at 62.3250 a dollar in Mumbai, the biggest weekly gain since May 16, prices from local banks compiled by Bloomberg show. The currency rose 0.6% today and is Asia’s best performer this week. Indian sovereign bonds completed a second weekly advance.“Strong inflows continue to lend support to the rupee,” said Paresh Nayar, head of currency and money markets at FirstRand in Mumbai. “India looks relatively attractive when you see other major world economies slowing.”The Reserve Bank of India forecasts the $1.9tn economy, Asia’s third-largest, to grow 5.5% in the year ending March 2015, compared with 4.7% last year.Three-month offshore non-deliverable forwards for the rupee rose 1.6% this week and 0.7% today to 63.27 a dollar, data compiled by Bloomberg show. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.