Bloomberg News

Indian Stocks Rally for Third Week on Earnings Outlook, Flows

January 25, 2012

Jan. 20 (Bloomberg) -- Indian stocks advanced for the third week as concerns over global economic growth eased and earnings of some local companies beat estimates.

Wipro Ltd., the country’s third-biggest software maker, surged the most in a week after its profit exceeded forecasts. ICICI Bank Ltd., the second-largest lender, reached a two-month high. Hero MotoCorp Ltd. and Bajaj Auto Ltd. rose after posting higher profits amid rising demand for personal transportation.

The BSE India Sensitive Index, or Sensex, rose 0.6 percent to 16,739.01 at the 3:30 p.m. close, taking this week’s rally to 3.6 percent. The index has risen 8.3 percent this month, set for its best January since 2001, as foreign funds purchased $1.2 billion of stocks, after pulling out $512 million in 2011 that caused the gauge to drop 25 percent and made the rupee Asia’s worst-performing currency.

“India was one of the worst performers last year and the rupee suffered too; so foreign investors saw a better value,” Stephen Corry, a Hong Kong-based chief investment strategist at LGT Group, which oversees $12 billion of Asian assets, said in an interview. Inflation was “the big fear for investors. Now, we are beginning to see that ease, foreign flows have returned and the Sensex has rallied.”

Global equities have rallied this year amid signs the U.S. economy is recovering, Europe will contain its debt crisis and speculation that China will ease lending curbs to spur growth. The EU is India’s biggest trading partner. Three out of nine Sensex companies that have posted earnings for the three months ended December missed analyst estimates. Forty percent lagged in the September quarter and 47 percent in the June quarter.

U.S. Jobs Data

A U.S. government report yesterday showed Americans claiming jobless benefits fell by 50,000 to 352,000 last week, the lowest level since April 2008. The MSCI Asia Pacific Index increased 1.1 percent.

The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. increased 0.6 percent to 5,048.60. The BSE 200 Index rose 0.6 percent to 2,031.36.

Wipro rallied 2.4 percent to 413.75 rupees, the most since Jan. 13. Third-quarter net income climbed 11 percent to 14.6 billion rupees ($291 million) in the quarter ended Dec. 31, beating the 14.5 billion-rupee median of 48 analyst estimates compiled by Bloomberg.

Hero MotoCorp, India’s largest motorcycle maker, advanced 2.2 percent to 1,946.6 rupees, taking this week’s gain to 8.6 percent. Bajaj Auto, the second-largest, jumped 6.4 percent to 1,561.35 rupees, its biggest rally since September 2009.

Net income at Hero rose 43 percent to 6.13 billion rupees ($122 million) in the December quarter. The median estimate of 37 analysts in a Bloomberg News survey was 6.27 billion rupees. Bajaj’s profit gained 19 percent to 7.95 billion rupees.

Lenders’ Earnings

ICICI Bank soared 5.7 percent to 842.45 rupees, extending this month’s gain to 23 percent. State Bank of India rose 2.6 percent to 1,932.85 rupees, taking its nine-day surge to 18 percent. Axis Bank Ltd., the fourth-largest, gained 5.7 percent to 1,009 rupees after its net income jumped 23 percent to 11 billion rupees, beating the 10.1 billion rupees estimated by analysts. The BSE India Bankex Index has soared 19 percent this month, set for its biggest jump since May 2009, on expectation that the central bank will ease its monetary policy.

While food inflation fell 0.4 percent in the week ended Jan. 7, the benchmark wholesale-price index in December slowed to a two-year low, giving the central bank room to keep rates on hold for a second straight meeting on Jan. 24.

‘Outperformance’

India’s rupee had its best week since October as signs the global economy is recovering stoked demand for emerging-market assets. The currency was the worst performer in Asia last year with a 16 percent slide. The Sensex trades at 14.7 times future profit, down from 19.4 times at end of 2010. The MSCI Emerging Markets Index trades at 10 times.

“India’s negative macro overwhelmed the potential of the country last year and that is changing on the margin leading to some outperformance,” Jayesh Gandhi, an executive director at Morgan Stanley Investment Management, told Bloomberg UTV today. “We haven’t seen some of the fundamental factors changing, but there’s hope. Equities are all about hope.”

Foreign funds bought a net $138.7 million of Indian stocks on Jan. 19, taking their investment in equities this year to $1.2 billion, data from the Securities & Exchange Board of India show.

--With assistance from Jeanette Rodrigues in Mumbai and Gan Yen Kuan in Kuala Lumpur. 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: Richard Frost at rfrost4@bloomberg.net


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