Bloomberg News

Indian Stocks Rise on Record Inflows, Goldman Upgrade

March 23, 2012

Indian stocks advanced, paring a weekly drop, as overseas investors continued buying local shares at a record rate and as Goldman Sachs Group Inc. upgraded the nation’s equities.

Reliance Industries Ltd. (RIL), the nation’s second most-valuable company, rallied as much as 1.7 percent. ITC Ltd. (ITC), the biggest cigarette maker, rose 2.1 percent to a record. Sterlite Industries (India) Ltd., the largest copper and zinc producer, tumbled 1.9 percent, pacing a decline among its peers.

The BSE India Sensitive Index (SENSEX), or Sensex, climbed 0.5 percent to 17,289.12 at 11:26 a.m. in Mumbai. The gauge is poised for a fifth straight weekly decline, the longest run of losses since August. The money and foreign-exchange markets are closed today for a public holiday.

Overseas investors were net purchasers of Indian shares for a ninth consecutive day on March 21, buying a net 6.52 billion rupees ($128.8 million) of stocks even amid concerns a widening fiscal deficit, rising oil prices and a weaker currency may curb economic growth. Goldman Sachs upgraded the nation’s equities to market weight from underweight.

“We see upside to consensus earnings-per-share growth estimates for 2013 and we find valuations to be relatively attractive in India, certainly more so than they have been since the global financial crisis,” Goldman Sachs analysts led by Timothy Moe wrote in a report dated March 22. “The global factors that have weighed heavily on India over the past year, the European credit concerns, have largely abated.

Scandal Concerns

India’s chief auditor said a report that coal-block allocations gave ‘‘undue benefits’’ to about 100 companies and caused the exchequer a loss of 10.7 trillion rupees was misleading, easing concerns another corruption scandal may cripple the government’s economic reform agenda.

The allegations against Prime Minister Manmohan Singh’s Congress Party-led government raised the specter of a 2008 phone-permit scandal that sparked the nation’s biggest graft probe, stalled legislation and contributed to the rout of Congress in a key state election this month.

‘‘Liquidity has been very strong despite the negative macro-economic factors in India,” said Kishor Ostwal, managing director of CNI Research Ltd. “The Goldman upgrade has boosted sentiment on the street. Plus the clarification about the possibility of another scam has helped, too.”

Foreign funds have poured 446.9 billion rupees into Indian stocks this year, a record for the period according to data compiled by Bloomberg, on speculation slowing inflation will spur the RBI to ease monetary policy.

Borrowing Costs

The Sensex has risen 12 percent this year. The gauge trades at 15.2 times estimated earnings, compared with 10.7 times on the MSCI Emerging Markets Index.

The Reserve Bank of India left the benchmark interest rate unchanged on March 15 after a record 13 increases between March 2010 and October last year. The wholesale-price index climbed 6.95 percent in February, after rising 6.55 percent in January.

Borrowing costs at the highest level since 2008 to fight price rises, policy gridlock and the worst investment slump in almost three years contributed to a slowdown in growth to 6.1 percent last quarter, the weakest since 2009.

The S&P CNX Nifty Index on the National Stock Exchange of India added 0.3 percent to 5,246.80. Goldman Sachs raised its March 2013 target on the index to 6,100.

India VIX, which measures the cost of protection against losses in the Nifty (NIFTY), dropped 4.2 percent to 23.72. A combined 1,274 million shares changed hands on the BSE and NSE yesterday, 39 percent more than the daily average in the past year, data compiled by Bloomberg show.

Reliance, operator of the world’s biggest refinery complex, added 0.9 percent to 743 rupees. ITC jumped 2.1 percent to 224.2 rupees, set for an all-time high. Sterlite fell 1.9 percent to 111.35 rupees. Hindalco Industries Ltd. (HNDL), the aluminum maker that controls U.S.-based Novelis Inc., dropped 1.1 percent to 131.45 rupees.

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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