June 30 (Bloomberg) -- India’s benchmark stock index rose to the highest level in two months, paring a quarterly decline, as concerns of a Greek debt default eased and overseas funds increased their holdings of local shares.
DLF Ltd., India’s biggest developer, climbed for the first time this week after Nomura Holdings Inc. advised investors to “buy” the shares. Hindustan Unilever Ltd., the biggest home products maker, reached a record. Foreigners have become net buyers of local stocks this year since June 27, reversing their stance for first time in three weeks. India’s food inflation slowed to a six-week low.
The Bombay Stock Exchange Sensitive Index, or Sensex, rose 152.01, or 0.8 percent, to 18,845.87 at the 3:30 p.m. close in Mumbai, its highest close since May 2. The gauge has risen 6.5 percent in past five days. It has fallen for a second straight quarter, losing 8.1 percent over the six-month period. The MSCI Emerging Markets Index has lost 0.7 percent in the period.
“We believe the concerns are easing,” Swati Kulkarni, a fund manager at UTI Asset Management Co., said by phone from Mumbai. “We’re more optimistic about the second half of the year. Inflationary pressure has softened and that’s a silver lining. We will get more foreign money” if the growth target of 8.5 percent is achieved, she said. UTI is the nation’s fourth- largest fund with $15 billion in assets.
The S&P CNX Nifty Index on the National Stock Exchange added 0.2 percent to 5,613.45. The BSE 200 Index added 0.2 percent to 2,305.92.
Greek Prime Minister George Papandreou clinched enough votes yesterday to pass the first part of an austerity plan aimed at meeting EU aid needs and staving off default for his debt-laden nation. Papandreou is on track to secure a bill setting out a strategy for a 78 billion-euro ($113 billion) package of budget cuts and asset sales.
Overseas funds bought a net 7.7 billion rupees ($171.7 million) of Indian stocks yesterday, raising total investment in equities this year to 26.7 billion rupees, data compiled by the regulator show. India’s rupee is set for a monthly gain, aided by flows from overseas investors.
“The Greece problem looks temporarily resolved and that allows the market to focus on fundamentals such as India’s relative economic strength,” Krishnamurthy Harihar, treasurer at FirstRand Ltd., said in Mumbai. “Fund flows are back.”
India’s $1.3 trillion economy expanded 7.8 percent in the three months ended March, the second fastest pace among Asia’s 10 biggest economies. The nation may achieve its growth target for this year even after the longest string of interest-rate increases in a decade, Finance Minister Pranab Mukherjee said in a Bloomberg News interview on June 28 in Washington.
Mukherjee said he is “still holding” the projection he made in the budget that India will achieve growth of about 8.5 percent in the current year.
An index manufacturing wholesale prices of farm products climbed 7.78 percent in the week ended June 18 from a year ago, the trade ministry said in a statement in New Delhi today. It gained 9.13 percent the previous week.
DLF rose 0.7 percent to 210.45 rupees, paring this year’s loss to 28 percent. Nomura increased its price estimate to 270 rupees from 253 rupees. State Bank rose 0.9 percent to 2,400 rupees. Hindustan Unilever surged 3.3 percent to 343.65 rupees, the highest price since Bloomberg began compiling data in 1991. The stock is the best performer on the Sensex this quarter with a 20 percent advance.
ITC Ltd., India’s biggest cigarette company, added 1.7 percent to 202.95 rupees and its July futures settled at 203.75 rupees. The stock is the best performer on the Sensex this year with a 16 percent gain. Hero Honda Motors Ltd., the biggest motorcycle maker, increased 1.5 percent to 1,877.2 rupees and is the second-best performing stocks on the Sensex this quarter.
The Sensex has dropped 8.1 percent this year, the worst performer among benchmark indexes in the 20 biggest markets, as India’s central bank raised rates 10 times since the start of 2010 to cool inflation. Companies on the Sensex are valued at 15.3 times estimated earnings, compared with 10.7 for the MSCI Emerging Markets Index.
Wholesale-price index climbed 9.06 percent in May from a year earlier, following an 8.66 percent increase in April, the highest among the so-called BRICS nations after Russia.
RBI Governor Duvvuri Subbarao said last month he’s willing to risk a slowdown in expansion to curb price pressures, which undermines spending power in a nation where the World Bank estimates three-quarters of people live on less than $2 a day.
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--With assistance from Anil Varma and Santanu Chakraborty in Mumbai. Editor: Ravil Shirodkar
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