Bloomberg News

India Stocks Climb on Europe Optimism; Tata Motors, Infosys Gain

October 10, 2011

Oct. 10 (Bloomberg) -- Indian stocks rose for a second day as concern eased the European debt crisis may escalate and hurt local exporters after the leaders of Germany and France pledged to shield banks.

Tata Motors Ltd., the owner of Jaguar Land Rover, jumped to a two-month high. Infosys Ltd., the software maker that gets 21 percent of its sales from Europe, rallied for a third day.

The BSE India Sensitive Index, or Sensex, gained 324.69, or 2 percent, to 16,557.23 at the 3:30 p.m. close in Mumbai. Companies in the gauge trade at 14 times future profits, down from 21.5 times in March 2010. The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. advanced 1.9 percent to 4,979.60 and its October futures settled at 5,000.

“Global factors are determining Indian share movements,” Ajit Dayal, Chairman of Quantum Asset Management Ltd., said in an interview with Bloomberg UTV today. “Indian investors do not need to worry about local factors. In terms of valuations, it’s a very good time to continue buying into Indian shares.”

German Chancellor Angela Merkel said European policy makers will do “everything necessary” to ensure banks have enough capital, while Nicolas Sarkozy said they would deliver a plan by the Nov. 3 Group of 20 summit, as the two leaders responded to pressure to defuse turmoil that has raged for 18 months.

Tata Motors, the nation’s biggest truckmaker, surged 7.3 percent to 170.75 rupees, the highest price in two months. DLF Ltd., the top developer, gained 4.8 percent to 228.65 rupees.

Reliance, Infosys

Reliance Industries Ltd., the owner of the world’s largest refining complex, added 3.3 percent to 829.25 rupees after the Financial Times reported yesterday, citing people familiar with the matter, the company is close to a deal with Walt Disney Co.’s local unit to get games and other content for its telecommunications service.

Infosys rose 3.2 percent to 2,589.95 rupees. The software maker will announce results on Oct. 12, the first company in the Nifty to post earnings for the quarter ending Sept. 30. It may report a profit of 18.9 billion rupees ($384 million), up from 17.4 billion a year earlier, according to the median estimate of 27 analysts surveyed by Bloomberg.

Companies such as Infosys and Tata Consultancy Services Ltd., Asia’s biggest computer-services company, earn about three-quarters of revenue from abroad. TCS climbed 1.5 percent to 1,064.7 rupees.

Bharti Airtel Ltd., the largest cell-phone operator, lead its peers higher after the government said it plans to increase the availability of airwaves to operators. The stock rose 2.5 percent to 363.55 rupees. Idea Cellular Ltd. added 2.1 percent to 92.1 rupees.

Citigroup Rating

Citigroup raised its recommendation on Indian stocks to “neutral,” citing a drop in global commodity prices, lower share valuations and a short-term peak in borrowing costs, according to a report dated Oct. 6.

The Sensex has fallen 19 percent this year on concern the central bank’s record interest-rate increases may compound the effects of Europe’s sovereign-debt crisis and slowing economic growth in the U.S. on company profits.

Earnings for 47 percent of the companies in the Sensex trailed estimates in the June quarter, compared with 33 percent that missed forecasts in the previous quarter, Bloomberg data show. Industrial output grew 3.3 percent in July, the slowest pace in almost two years, and data for August will be released on Oct. 12. A Bloomberg News survey of 17 economists expects production to rise to 4.7 percent from a year earlier.

Overseas funds have pulled out a net 28.3 billion rupees from local equities this year, data on the market regulator’s website show. They withdrew a net $2.4 billion in August, the most since October 2008, the data show. That caused the Sensex to drop 8.4 percent that month, the worst in at least a decade.

“The price of Indian shares will continue to be hostage to what foreigners think of India and the world,” Quantum’s Dayal said.

India’s $1.2 trillion stock market, Asia’s fourth-biggest, is influenced by foreign fund flows. Inflows from abroad surged to a record $29.4 billion in 2010, making the Sensex the best performer among the world’s top 10 markets. The largest-ever outflow in 2008 led the biggest annual slump of 52 percent.

--Editor: Ravil Shirodkar

To contact the reporters on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net; Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

To contact the editor responsible for this story: Shiyin Chen at schen37@bloomberg.net


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