Bloomberg News

India Sensex Gains Most in Three Weeks; Reliance, ITC Lead Rally

June 23, 2011

June 23 (Bloomberg) -- India’s benchmark stock index rose the most in three weeks as some investors judged recent losses as excessive.

Reliance Industries Ltd., India’s most valuable company, advanced 2.9 percent, paring this year’s loss to 18 percent. ITC Ltd., Asia’s second-largest cigarette maker, climbed the most in about four months. Maruti Suzuki India Ltd., the biggest carmaker, fell after its parent cut the sales forecast.

The Bombay Stock Exchange Sensitive Index, or Sensex, rose 176.86, or 1 percent, to 17,727.49 at the 3:30 p.m. close in Mumbai, its steepest increase this month. Its 14-day relative strength index, which measures how rapidly prices increased or fell during the specified period, has been near 30 for the past three day. Some investors see readings below 30 as a signal to buy. The Sensex fell to a four-month low on June 20, driving valuations for its 30 members to the lowest in two years.

“Some valuation comfort is emerging” after the recent declines, Navneet Munot, chief investment officer at SBI Funds Management Pvt., said in an interview. The fund, which manages $9.3 billion in assets, is advising clients to focus on stocks over sectors, he said, without naming any.

The Sensex has lost 13.5 percent this year, the most among Asian benchmark indexes tracked by Bloomberg, on concern rising borrowing costs will hurt corporate profits. Sensex companies are valued at 14.4 times estimated earnings, compared with 10.8 for the MSCI Emerging Markets Index.

The S&P CNX Nifty Index on the National Stock Exchange increased 0.8 percent to 5,320 and its June futures settled at 5,319. The BSE 200 Index added 0.6 percent to 2,191.50.

‘Technical Bounce’

Reliance, which fell to a 26-month low on June 20, climbed 2.9 percent to 870.5 rupees. The stock’s 14-day RSI was at 30 yesterday, a buy signal for some investors.

“Technically, it was oversold and some bounce back was expected,” Avinash Gupta, vice-president for equity research at Globe Capital Market Ltd., said from New Delhi. “Investors are getting good value at these prices.”

Reliance is headed for its worst monthly decline this year after the government auditor said in a draft report this month the company inflated expenses at its biggest natural gas block off the nation’s east coast. Billionaire Chairman Mukesh Ambani is struggling to raise production from that deposit, resulting in Reliance’s slowest profit growth in six quarters.

Oil & Natural Gas Corp., the largest state oil explorer, rose 1.5 percent to 264.65 rupees and its June futures settled at 264.40 rupees. Indian Oil Corp., the country’s biggest refiner, surged 2.8 percent to 328.8 rupees.

India’s petroleum ministry sought an increase of 4 rupees a liter on diesel and 150 rupees a cylinder on cooking fuel, CNBC- TV18 television channel reported today, citing NewsWire18 agency. The ministry sought a ministerial panel’s approval to remove excise levy on diesel, according to the report.

Cheaper Oil

Investor confidence in India’s state-owned oil refiners is improving the most in a year as the 8 percent decline in crude prices this month boosts the companies’ profit outlook.

“Cheaper oil relaxes the mind a little,” said Mahendra Jajoo, the Mumbai-based head of fixed-income investments at Pramerica Asset Managers, a unit of Prudential Financial Inc. “It will reduce uncertainty on the inflation front and losses for refiners.”

Asia’s third-biggest economy caps diesel and cooking-fuel prices to shield 66 percent of the population that lives on less than $2 a day from price pressures. India’s inflation is running at 9.06 percent, more than twice the rate in the U.S. and almost four times Germany’s.

Maruti Suzuki sank 2.1 percent to 1,099.3 rupees, falling for the ninth day. Suzuki Motor Corp. cut its India full-year sales forecast to 5 percent from 8 percent and expects a drop in profit at its India unit, President Osamu Suzuki said today.

Food Costs

India’s food inflation reached a two-month high, adding pressure on the central bank to raise interest rates further. The Reserve Bank of India raised the repurchase rate to 7.5 percent from 7.25 percent on June 16, extending the longest run of tightening in a decade and joining its peers from China to South Korea in stepping up the fight against surging prices.

“The outlook for Indian equities looks quite hazy on the domestic and the global front,” SBI Fund’s Munot said.

Rising borrowing costs have begun to crimp demand. India’s $1.4 trillion economy expanded 7.8 percent in the three months through March, the slowest pace in five quarters, data show. Some 33 percent of companies in the Sensex reported profits that missed analysts’ estimates in the March quarter, compared with less than a quarter last year.

Overseas investors sold a net 5.51 billion rupees ($123 million) of Indian equities on June 21, increasing their total withdrawals from stocks this year to 21.5 billion rupees, data from the Securities and Exchange Board of India show.

--With assistance from Santanu Chakraborty in Mumbai and Rakteem Katakey in Mumbai. Editor: Ravil Shirodkar

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net.

To contact the editors responsible for this story: Darren Boey at dboey@bloomberg.net


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