Indian stocks climbed to the highest level in more than three weeks, tracking Asian equities, as higher-than-forecast data for U.S. payrolls and the services industry boosted prospects for exports to the biggest economy.
Reliance Industries Ltd. (RIL), owner of the world’s largest refining complex, surged the most since May 2009 on a report it may secure approvals to develop discoveries after letting the nation’s auditor check accounts related to its biggest gas deposit. Tata Motors Ltd. (TTMT), owner Jaguar Land Rover, rallied 3.7 percent after losing almost 8 percent over the past month.
The BSE India Sensitive Index (SENSEX), or Sensex, jumped 1.3 percent to 17,412.96 at close, the highest level since July 11. Data on Aug. 3 showed U.S. payrolls rose in July, boosted by a pickup in employment at automakers, even as the jobless rate unexpectedly gained. The MSCI Asia Pacific Index (MXAP) advanced 1.7 percent to the highest level since July 5. The U.S. took in 11 percent of Indian exports in the six months ended September 2011, according to government data.
“Equity as an asset class is definitely very attractive,” Sukumar Rajah, chief investment officer for Asian equities at Franklin Templeton Investments, told Bloomberg UTV in an interview. “The implied risk-premium for equities is extremely elevated at this point of time.”
The Sensex rose 2.1 percent last week, ending three weeks of losses. The gauge has increased 13 percent this year, helped by record overseas investor purchases. Foreign funds bought a net $30 million of stocks on Aug. 3, taking their investment into Indian equities this year to $10.7 billion, according to data from the market regulator.
Indian parliament resumes this week as the government bids to end two years of legislative gridlock to bolster economic expansion amid Europe’s crisis and elevated domestic inflation that has limited room for interest-rate cuts. Gross domestic product rose 5.3 percent in the March quarter, the weakest pace in almost a decade.
“There is expectation building up that the government will announce measures to boost the economy,” Kishor Ostwal, managing director at CNI Research Ltd., said by phone yesterday.
Indian Finance Minister Palaniappan Chidambaram today said he will seek fiscal consolidation and work to revive investment, making his first statement after being named finance minister last week. Policies will be “fine-tuned” to assist capital flows, Chidambaram said, adding “corrective measures” will be taken on tax laws where necessary.
Reliance surged 5.9 percent to 786.05 rupees, its biggest gain since May 18, 2009. Reliance agreed to submit information sought by the government auditor under the production-sharing contract for the KG-D6 block, the Economic Times reported, citing unidentified people close to the company. Oil Minister S. Jaipal Reddy asked for the data last month, when he told Reliance Executive Director P.M.S. Prasad the government would speed up approvals for proposals to develop four blocks, including KG-D6, according to the report.
Tushar Pania, a spokesman for Reliance, couldn’t be reached on his mobile phone for comment after two attempts.
The rally pushed up the stock’s 14-day relative-strength index above 70 for first time since May 2009, signaling to some investors the stock is in overbought zone.
Reliance Industrial Infrastructure, 45.4 percent owned by Reliance Industries and not a part of the Sensex, soared 12 percent to 441.10 rupees, the most since May 21.
Tata Motors rallied 3.7 percent to 229.05 rupees, a three- week high. HDFC Bank Ltd. (HDFCB), the second-largest private lender, gained 2.1 percent to a record 600.25 rupees and larger rival ICICI Bank Ltd. advanced 1.5 percent to 954 rupees. GAIL India Ltd. (GAIL), the biggest natural-gas distributor, jumped 2.4 percent to 365.55 rupees.
Companies on the Sensex are valued at 13.6 times estimated earnings, compared with 10.6 times for the MSCI Emerging Markets Index that has advanced 5.2 percent this year.
Indian equities are “neither very cheap nor expensive,” Franklin’s Rajah said. They are “probably close to fair value,” he said.
India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index, rose 0.6 percent to 16.22. The Nifty jumped 1.3 percent to 5,282.55. The BSE-200 Index (BSE200) added 1 percent to 2,137.14. The top two bourses traded 736 million shares on Aug. 3, compared with a 12-month daily average of 897 million shares.
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