Indian stocks climbed, putting the benchmark gauge on course for its best week in four years, as optimism over federal budget proposals spurred capital inflows and the rupee strengthened for a fifth day.
Tata Steel paced a rally among its peers after a top official said the government may consider a bailout package for indebted metal producers. Larsen & Toubro and Bharat Heavy Electricals, the nation’s largest engineering firms, surged more than 6% each. Tata Motors increased to a one- month high after Jaguar Land Rover US sales increased 25%. Dr Reddy’s Laboratories soared the most in six years.
The S&P BSE Sensex jumped 1.5% at the close, extending the week’s advance to 6.3%, the steepest climb since December 2011. Almost half of 2016’s losses have been erased in the three sessions since Monday’s budget as the most beaten-down industries, including banks, metal and engineering shares, led a comeback. Global funds bought a net $443mn of local stocks on March 1, the biggest single-day inflow since September 15.
“The markets have started stabilising,” Deven Choksey, managing director of Mumbai-based KR Choksey Shares & Securities, said in an interview to Bloomberg TV India. “Foreign investors are covering positions in the derivatives space, especially in counters where they were perennially short like banks, and that’s why we are seeing a rally.”
Finance Minister Arun Jaitley in his budget speech announced boosting spending on a rural jobs programme and affirmed a goal of cutting the budget deficit gap to 3.5% of gross domestic product in the year starting April 1, the smallest in nine years. By sticking to deficit targets, the government has “given the RBI an opportunity to bring down rates, which will give breathing space to metal companies,” Choksey said.
Twelve of 16 economists surveyed by Bloomberg after the budget expected Reserve Bank of India governor Raghuram Rajan to lower the benchmark rate by as much as 50 basis points before the April 5 review, while the other four predicted cuts sometime this year.
Tata Steel rallied 7.3% to its highest since July 7, extending this week’s gain to 16%. Steel Authority of India added 4.8% in a fifth day of gain. Jindal Steel & Power jumped 11%, the most since February 15.
The steel ministry is working with banks and policy advisers to consider the feasibility of a bailout package for indebted local metal producers, Aruna Sundararajan, the top-most bureaucrat in the steel ministry, said in an interview on Wednesday.
Losses at Indian steelmakers have widened as cheap imports from countries including China forced them to cut prices. The government in September imposed safeguard taxes and set a minimum import price last month.
Tata Motors soared 6.2% to its highest since February 5. Dr Reddy’s surged 5.7%, the most since October 2009. Bharat Heavy gained 6.4%, paring this year’s drop to 39%. Larsen & Toubro added 6.1% to its highest level since January 6.
The Sensex has lost 5.8% this year as global funds withdrew $2.4bn from local shares amid a selloff in emerging-market assets. The gauge trades at 15.1 times its 12-month projected earnings, compared with 11.4 times for the MSCI AC Asia Pacific Index.
Meanwhile, the rupee rose for a fifth day in its longest winning streak since December after foreign investors boosted holdings of local stocks.
The rupee gained 0.3% to close at 67.34 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It rose to 67.28 earlier, the strongest since January 15. The Indian currency has strengthened 2% in five days, paring its 2016 loss to 1.8%.