Oct. 12 (Bloomberg) -- Indian stocks rose to a three-week high after Infosys Ltd.’s earnings beat estimates and as a slower-than-expected growth in factory output fueled speculation the central bank may halt its record rate increases.
Infosys, the first company in the benchmark BSE India Sensitive Index to report this season, surged the most since May 2009. Net income at the second-largest software exporter rose 9.8 percent to 19.1 billion rupees ($387 million) in the three months ended Sept. 30, compared with the 18.7 billion rupee median of 35 analysts’ estimates compiled by Bloomberg. State Bank of India climbed the most in 14 months.
The BSE India Sensitive Index, or Sensex, added 421.92, or 2.6 percent, to 16,958.39 at the 3:30 p.m. close in Mumbai, its highest level since Sept. 21. The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. gained 2.5 percent to 5,099.40. Its October futures settled at 5,114.85. The BSE-200 Index increased 2.3 percent to 2,079.62.
“Investors will take comfort from the good results from Infosys even though they were aided by depreciation in the rupee,” said Aneesh Srivastava, Mumbai-based chief investment officer at IDBI Federal Life Insurance Co. that oversees about $427 million. “The effect of interest-rate increases by the central bank is visible on industrial output. Investors are expecting the Reserve Bank to pause rate tightening.”
Infosys rallied 7 percent to 2,679.35 rupees, its highest price since Aug. 4. Profit beat expectations for the first time in a year and the company raised its full-year sales guidance, joining Accenture Plc in posting profit that topped estimates.
Larger rival Tata Consultancy Services Ltd. advanced 3.7 percent to 1,079.05 rupees. Wipro Ltd. increased 2.6 percent to 350.55 rupees.
India’s biggest software makers earn about three-quarters of their revenue from abroad. Customers in Europe and North America contributed almost 87 percent to Infosys’s sales in the year ended March 31. The Indian rupee has weakened 8.9 percent against the dollar this year, Asia’s worst performer, boosting the value of repatriated earnings of exporters.
Output at factories, utilities and mines increased 4.1 percent in August from a year ago after a revised 3.8 percent gain in July, the government said today. The median of 20 estimates in a Bloomberg News survey was for a 4.7 percent gain.
The Sensex has fallen 17 percent this year on concern the Reserve Bank of India’s record interest-rate increases may add to the effects of Europe’s sovereign-debt crisis and slowing U.S. economic growth on profits. Companies in the gauge trade at 14.4 times future earnings, down from 21.5 times last March. The MSCI Emerging Markets Index trades at 9.8 times.
India’s wholesale-price inflation rate was probably 9.75 percent in September, holding near a 13-month high, the median of 20 estimates in a Bloomberg News survey showed. The commerce ministry will release the data on Oct. 14.
“Until we start to see inflation being tamed and begin to see interest rates come down, the markets will likely remain a difficult place to be,” Roger Yeoman, head of institutional equities at Avendus Capital Pvt., said on Bloomberg UTV. “The Indian market is not hugely cheap, but is still yielding return on equity in the mid 20s, which is pretty good performance.”
State Bank jumped 6.1 percent to 1,872.05 rupees, paring this year’s loss to 33 percent. ICICI Bank Ltd., the second- biggest lender, gained 3.3 percent to 859.7 rupees.
Overseas investors bought a net 2.81 billion rupees ($57 million) of Indian equities on Oct. 10, paring their outflow from equities this year to 25.5 billion rupees, according to data on the website of the Securities & Exchange Board of India. They withdrew a net $2.4 billion in August, the most since October 2008.
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.
--With assistance from Santanu Chakraborty in Mumbai. Editor: Ravil Shirodkar
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