India bourses rise; rupee falls

Indian stocks climbed, with the benchmark gauge extending last week’s advance, before the important budget session of parliament begins today.
Hindustan Unilever, the largest personal-products company, rallied the most in 13 months. Sun Pharmaceutical Industries rose to become the best-performing stock on the S&P BSE Sensex this year. Reliance Industries, the owner of the world’s largest refining complex, climbed for a second day. ITC slid to near a three-year low amid concern the government may raise taxes on tobacco products.
The Sensex added 0.3% at the close in Mumbai, extending last week’s 3.2% rally, which was the steepest in four months. Investors are looking ahead to the budget on February 29 for clarity on the government’s plan to lower the corporate tax rate and phase out tax breaks. Junior Finance Minister Jayant Sinha said over the weekend his ministry is working on a forward-looking budget that will ensure India is a “haven of stability” amid the global turmoil.
“India is growing at 7% when the rest of the world is searching for growth and negative interest rates prevail in Europe and Japan,” Vikram Kotak, managing partner at Crest Capital & Investment, said in an interview with Bloomberg TV India. “The budget must focus on boosting expenditure to get growth back on track, instead of focusing only on fiscal consolidation. Higher growth itself will take care of the fiscal deficit.”
Economists surveyed by Bloomberg expect Finance Minister Arun Jaitley to meet the fiscal deficit target for the year ending March 31, while slightly pushing back next year’s goal to 3.6% of gross domestic product. Stock markets would overlook the widening in the budget gap up to 3.8% if the funds are used for public spending, Kotak said.
Hindustan Unilever surged 4.1%, the most since January 21, 2015 and the best performer on the Sensex yesterday. Dabur India added 1.7%. Britannia Industries advanced 2.8% to take gains in the past year to 36%.
Jaitley is expected to make a decision on whether to implement the planned $15bn salary hike for government employees, which would affect consumer goods companies.
“Investors are speculating that the government will announce measures to boost consumption,” Arun Kejriwal, a director at Kejriwal Research & Investment in Mumbai, said by phone. “The finance minister is likely to announce the increase in pension for retired army men and salary increases for federal employees. Such steps would be good for consumer stocks.” Sun Pharmaceutical increased 2.1% to its highest level since October 30. Reliance gained 1.9%, extending last week’s 4.2% advance.
Maruti Suzuki India tumbled 1.6% in a third day of declines after unrest in Haryana state forced the nation’s top carmaker to close some plants. A disruption to component supplies amid demonstrations over caste rights led to a weekend halt in output at its Manesar and Gurgaon factories that jointly produce about 5,000 vehicles a day.
ITC fell 1.5%. NTPC, India’s biggest power producer, slid 2.2%. Adani Ports & Special Economic Zone declined for a third day.
Overseas investors sold a net $43mn of Indian stocks on February 17, taking this year’s outflow to $2.5bn. They bought $3.3bn of shares last year, the smallest in four years.
The Sensex has retreated 9% this year and trades at 14.9 times its estimated 12-month earnings, versus a multiple of 10.9 for the MSCI Emerging Markets Index.
Meanwhile, the rupee fell 0.2% to 68.6050 a dollar, prices from local banks compiled by Bloomberg show. It declined to as low as 68.6925 earlier, near a record 68.845 seen in August 2013, before paring losses on speculation state-run lenders bought the currency on behalf of the central bank.