Bloomberg News

India’s Sensex Advances on Greek Bailout Deal, Budget Outlook

March 13, 2012

Indian stocks gained for the third day after finance ministers in the Euro area, the country’s biggest trading partner, signed off on a $171 billion Greek bailout, and on speculation the government will deliver a budget aimed at spurring growth.

Reliance Industries Ltd. (RIL), the nation’s largest company, climbed to a two-week high. Sterlite Industries (India) Ltd. (STLT), the biggest copper and zinc producer, soared 4.8 percent, pacing gains among its peers. Infosys Ltd. (INFO), the second-biggest software maker that gets more than 95 percent of their sales from abroad, climbed for the first time in three days.

The BSE India Sensitive Index (SENSEX), or Sensex, rose 1.3 percent to 17,813.62 at close. The gauge has increased 15 percent this year as foreign funds poured $8 billion into shares on optimism the central bank will ease monetary policy as inflation eased. Emerging-market stock funds took in $907 million in the week ended March 7, the 10th week of flows, according to EPFR Global.

“Liquidity is king and we have seen liquidity injections all over the world,” Jyoti Vaswani, chief investment officer at Aviva Life Insurance Co., told Bloomberg UTV today. “If liquidity injections continue in the developed world, you could see that drive Indian markets.”

Greece’s rescue package caps months of talks between the nation, the IMF and euro-area authorities over a follow-up to the first bailout that failed to halt the region’s debt crisis. India’s government presents its annual budget on March 16, a day after the Reserve Bank of India reviews interest rates. The RBI unexpectedly cut the reserve ratio for banks on March 9 to ease a cash shortage.

‘Spur Growth’

Foreign flows “have driven the markets to the level we have seen,” Aviva’s Vaswani said. “From here on fundamentals take over. The intent of the government on focusing on economic growth is going to the key driver. We will wait to see what steps the government takes to spur growth in the economy.”

Factory production in January jumped 6.8 percent, after a revised 2.5 percent increase in December, the government said yesterday, beating all 26 estimates in a Bloomberg News survey. A faster-than-estimated gain signals production is withstanding the impact of higher borrowing costs on domestic demand and the fallout for exports from Europe’s debt crisis.

Still, inflation accelerated to 6.7 percent in February, from 6.55 percent the previous month, according to a Bloomberg News survey of 24 analysts. That will be the first gain since September and may prompt the central bank to hold rates after raising them a record 13 times between March 2010 and October last year to cool price increases.

Rate Outlook

Twelve of 14 analysts surveyed by Bloomberg forecast the RBI may leave its benchmark rate unchanged at 8.5 percent. Two forecast a 25 basis-point cut to 8.25 percent.

Reliance, owner of the world’s largest refining complex, rose 2.7 percent to 819.95 rupees, its highest close since Feb. 29. Maruti Suzuki India Ltd. (MSIL), the biggest carmaker, added 2.3 percent to 1,368.25 rupees. Infosys rose 1.5 percent to 2,859.8 rupees, ending a two-day 2.2 percent slide.

Sterlite surged 4.8 percent to 120.3 rupees. Hindalco Industries Ltd. (HNDL), the aluminum maker that controls U.S.-based Novelis Inc., increased 2.9 percent to 141.45 rupees.

Steel Authority of India Ltd., the second-largest producer of the alloy, jumped 4.8 percent to 101 rupees after raising prices of some products this month and on speculation coking coal costs will fall starting April. Tata Steel Ltd. (TATA), the biggest producer, gained 2.6 percent to 468.1 rupees. Jindal Steel & Power Ltd. (JSP) soared 3.7 percent to 611 rupees, extending its three-day gain to 14 percent.

The S&P CNX Nifty (NIFTY) Index on the National Stock Exchange of India added 1.3 percent to 5,429.50. India VIX (INVIXN), which measures the cost of protection against losses in the Nifty, lost 5.8 percent to 24.75, its lowest level since Feb. 23. The BSE 200 Index (BSE200) increased 1.3 percent to 2,211.70.

Overseas investors bought a net 13.9 billion rupees ($278 million) of Indian stocks yesterday, raising their investment this year to 395.7 billion rupees, according to the regulator.

The Sensex trades at 15.6 times future earnings, compared with 19.4 times at the end of 2010. The MSCI Emerging Markets (EEM) Index trades at 10.8 times.

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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