Bloomberg News

India’s Sensex Completes Weekly Advance as Europe Concerns Ease

July 22, 2011

July 22 (Bloomberg) -- India’s benchmark stock index rose this week as European leaders agreed on aid for Greece, easing concerns the region’s debt crisis may spread and threaten global growth and as some earnings boosted sentiments.

Infosys Ltd., the country’s second-biggest software maker, paced gains among peers. India’s largest software companies get about a quarter of their orders from Europe. After eight hours of talks in Brussels, leaders announced $229 billion in new aid for Greece late yesterday, risking temporary default in their efforts to prevent the crisis spreading. Bharti Airtel Ltd., the largest mobile-phone operator, jumped to a 22-month high after reports it raised tariff. Axis Bank Ltd. and Jet Airways (India) Ltd. gained after their earnings report.

“We have decided to increase allocations to India in the past three to four weeks,” said Sam Mahtani, who helps oversee $6 billion in assets as director of emerging-market equities at U.K.-based F&C Asset Management Plc. “There could be weak days as we navigate markets with news flow from Europe and the U.S., but we don’t see a significant downside to India and emerging markets. The market has pretty much bottomed out.”

The Bombay Stock Exchange Sensitive Index, or Sensex, gained 286.11, or 1.6 percent, to 18,722.30 at the 3:30 p.m. close in Mumbai. The gauge gained 0.9 percent this week. The index has declined 8.7 percent this year, the second-worst performer among key indexes in the world’s 10 biggest markets, amid rate increases.

Monetary Tightening

The Reserve Bank of India meets on July 26 to set policy after raising rates 10 times since March last year to rein in accelerating prices. Inflation quickened to 9.44 percent in June from 9.06 percent in May, the government said last week. The MSCI Asia Pacific Index gained 1.3 percent, erasing its loss for the year, on the new aid plan for Greece. The gauge added 2.4 percent this week.

“High inflation and the possibility of another 25 to 50 basis point increase in rates is pretty much discounted,” said Mahtani. “We are looking to position the portfolio back into rate-sensitive areas. The two themes are banking and autos.”

ICICI Bank Ltd., India’s second-biggest lender, added 2.6 percent to 1,068.05 rupees. Housing Development Finance Corp., the nation’s biggest mortgage lender, gained 1.3 percent to 707.85 rupees. Mahindra & Mahindra Ltd., the nation’s biggest maker of sport-utility vehicles and tractors, jumped 3.1 percent to 724.35 rupees, and Bajaj Auto Ltd., the No.2 motorcycle maker, added 2.1 percent to 1,448.55 rupees.

Mahtani said he favors the companies among domestic banks and automobile companies.

The S&P CNX Nifty Index rose 1.7 percent to 5,633.95 and its July futures settled at 5,641.60. The BSE 200 Index climbed 1.6 percent to 2,321.19.

Sensex Weighting

Infosys surged 2.2 percent to 2,828.25 rupees and rival Tata Consultancy Services Ltd. gained 1 percent to 1,133.4 rupees. Wipro Ltd., the third-biggest, gained 1.2 percent to 405.85 rupees and its July futures settled at 407 rupees.

Reliance Industries Ltd., which has the biggest weighting on the Sensex, increased 1.5 percent to 873.35 rupees and its July futures traded at 876 rupees. The company may say July 25 profit in the quarter ended June increased 16.5 percent to 56.5 billion rupees, according to the median estimate of 14 analysts in a Bloomberg News Survey.

Bharti rallied 4.1 percent to 411.15 rupees, its highest since October 2009. The stock is the best performer this week and the second-best on the Sensex this year. The company raised call tariffs to 1.2 paise a second from 1 paise in some zones, Bloomberg UTV reported today, citing NewsWire18, sparking investor optimism the move will boost its earnings.

Airline Loss

Axis Bank jumped 4.6 percent to 1,296.9 rupees after its first quarter profit rose 27 percent to 9.42 billion rupees, more than the 9.11 billion rupees estimated by analysts.

Jet Airways, the biggest airline, climbed 2.4 percent to 499.45 rupees after reporting a loss of 1.23 billion rupees, less than 2.24 billion rupees estimated by analysts.

Companies on the Sensex may report a profit growth of 12 percent to 14 percent in the year ending March 2012, less than the consensus estimate of 17 percent, Rakesh Arora, head of research at Macquarie Capital Securities (India) Pvt., said in a July 18 interview. Bank of America Merrill Lynch reduced its profit estimate to 17 percent from 21 percent, Jyotivardhan Jaipuria, head of India research, said July 19.

Three out of seven Sensex companies that have posted earnings for the June quarter have missed estimates as rising borrowing costs damped demand. Some 33 percent of the companies in the Sensex missed analysts’ profit estimates in the March quarter, compared with less than a quarter that did so last year, data compiled by Bloomberg show.

Companies on the Sensex are valued at 15 times estimated earnings, down from 21.5 times in March 2010, and compared with 11 times for the MSCI Emerging Markets Index.

Overseas funds sold a net 311 million rupees of Indian equities on July 20, paring their investment in stocks this year to 96.2 billion rupees, according to data on the website of the Securities and Exchange Board of India.

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

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

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


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