Most Indian Shares Advance for Second Day on Policy Optimism
January 11, 2012, 7:16 PM ESTBy Rajhkumar K Shaaw
Jan. 11 (Bloomberg) -- Most stocks on India’s benchmark index rose amid expectation the government will take measures to stimulate growth in Asia’s third-biggest economy.
Pantaloon Retail India Ltd. led gains among peers after the government permitted global retailers including Starbucks Corp. and Ikea to open stores without a local partner. Hindalco Industries Ltd. and Sterlite Industries (India) Ltd. surged on optimism aluminum prices will rise.
The BSE India Sensitive Index, or Sensex, gained less than 0.1 percent to 16,175.86 at the 3:30 p.m. close. Sixteen shares rose and 14 fell. Morgan Stanley, JPMorgan Chase & Co. and Bank of America Corp. expect local stocks to climb up to 20 percent in the next 12 months as the central bank cuts interest rates to stoke growth. The measure may reach 18,000 by the year-end, Deutsche Bank AG said today. The Sensex plunged 25 percent last year on concern a weak rupee and high funding costs will worsen the effects of the European crisis on company earnings.
“We’ve advised clients to close short positions and look at buying on dips” in India, Mohammed Apabhai, head of Asia trading strategy at Citigroup, told Bloomberg UTV. “We’re hoping that we’re past the peak of the wall of worry. A lot of the bearishness is priced in.”
The Reserve Bank of India, whose next policy meeting is due Jan. 24, paused on rates in December after seven increases last year caused factory output in October to decline for the first time since 2009 and the $1.7 trillion economy to grow the least in more than two years. Government data on Jan. 16 may show the inflation rate slid to a two-year low of 7.4 percent, according to a Bloomberg survey of 15 economists.
‘Easing Bias’
“The RBI obviously doesn’t want to keep policy tight for too long as it’s already having an impact on industrial output and on consumption as well,” Citigroup’s Apabhai said. “They are moving more towards an easing bias than a tightening one.”
The S&P CNX Nifty Index on the National Stock Exchange of India added 0.2 percent to 4,860.95. The BSE 200 Index gained 0.4 percent to 1,954.91.
Pantaloon, the biggest retailer, jumped 4.4 percent to 153.3 rupees. Shoppers Stop Ltd. rallied 5.1 percent to 305 rupees. Trent Ltd. rose 1.9 percent to 848.8 rupees.
The government yesterday abandoned a rule against foreign single-brand retailers running stories without a local partner, paving the way for global companies including Starbucks Corp. and Ikea. Wal-Mart Stores Inc., Carrefour SA and other foreign chains are still excluded from the nation’s $400 billion retail market after an attempt last year to change the law failed. Prime Minister Manmohan Singh’s administration has struggled to advance its initiatives amid opposition from its own allies and a corruption scandal that paralyzed parliament.
‘Better Placed’
India is “better placed” in BRIC nations as Brazil faces slowing growth, Russia’s economy isn’t “well diversified” and China’s model is being “challenged,” New York University professor Nouriel Roubini said.
“In relative terms, India is actually positioned well,” Roubini told Bloomberg UTV in New Delhi today. Still, the pace of “structural reforms” has been “mediocre” and unless the nation pushes ahead with those changes, economic growth in “absolute terms” will “disappoint,” he said.
Jet Airways (India) Ltd., the biggest airline, increased 7 percent to 203.75 rupees, its steepest climb since Nov. 25. A government panel backed allowing foreign airlines to own up to 49 percent of local operators. The recommendation will now be considered by a ministerial panel before a final decision is made by the cabinet, Civil Aviation Minister Ajit Singh said today. The ministry had earlier proposed a 24 percent cap.
Kingfisher Airlines Ltd. jumped 5 percent to 22.05 rupees. SpiceJet Ltd. rallied 5.5 percent to 19.25 rupees.
Metal Prices
Hindalco, the worst performer on the Sensex in 2011, added 5.9 percent to 130.35 rupees. Sterlite, the second worst, rose 5.1 percent to 100.7 rupees, its highest level since Dec. 9.
Aluminum prices will rise to as much as a six-month high as buyers replenish stocks to meet a rebound in demand. Prices may climb to as much as $2,300 a metric ton in London by March 31, said Mukesh Kumar, chief operating officer of London-based Vedanta Resources Plc., India’s biggest producer.
Mahindra & Mahindra declined 1.3 percent to 680.35 rupees. The stock rose 5.5 percent yesterday. Bharti Airtel Ltd., the largest mobile-phone operator, retreated 1.4 percent to 325.65.
Infosys Ltd., the nation’s second-biggest software maker, is due to report earnings tomorrow, the first Sensex company to do so. Net income may climb 29 percent to 22.9 billion rupees, according to the median of 37 analyst estimates compiled by Bloomberg. The shares lost 1.3 percent to 2,826.6 rupees.
Larger rival Tata Consultancy Services Ltd. slipped 2.4 percent to 1,137 rupees.
Earnings forecasts for the 30 companies in the Sensex for the year ending in March 2012 have fallen 8.7 percent to 1,150 rupees a share, the most since the year ended in March 2009, according to 1,500 estimates compiled by Bloomberg.
‘Resilient Flows’
Still, foreign investors bought a net 4.1 billion rupees ($78 million) of Indian stocks yesterday, taking investments this year to 14.5 billion rupees, according to the regulator. They’ve been net buyers for six straight days, after pulling out net $512 million from equities last year. Flows reached a record $29.4 billion in 2010.
“Regardless of the sell-off we saw last year, foreign flows have been extremely resilient towards the Indian equity market,” Apabhai said. “We haven’t actually seen a huge amount of outflow, relative to what we had seen going into the market. And that is to be compared with markets like Korea and Taiwan where we did see significant selling.”
--With assistance from Santanu Chakraborty in Mumbai and Manish Modi in New Delhi. 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
