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Indian stocks advanced the most since June, tracking global equities, as the European Central Bank’s announcement of an unlimited bond-buying plan boosted demand for riskier assets.
The BSE India Sensitive Index (SENSEX), or Sensex, rose 2 percent to 17,683.73 at close in Mumbai, the most since June 29. Reliance Industries Ltd. (RIL), operator of the world’s largest refining complex, jumped the most in a month after CLSA Asia-Pacific Markets raised its price estimate on the stock. ICICI Bank Ltd. (ICICIBC), the biggest private lender, surged 4.6 percent, leading gains among peers, and Tata Motors Ltd. (TTMT) rallied 4.4 percent.
ECB President Mario Draghi said yesterday policy makers agreed to an unlimited bond-purchase program to reduce interest rates for struggling nations and strengthen the euro. The European Union is India’s largest trading partner, accounting for 17.2 percent of the country’s exports in the six months ended September 2011, according to India’s trade ministry.
“Financial markets have returned to sanity as the ECB’s policy will help remove the risk of at least a sudden collapse in the euro zone,” Gopal Agrawal, chief investment officer at the Indian unit of Mirae Asset Financial Group in Mumbai, said by phone. “The downside has been protected.”
Asian stocks rose, with the MSCI Asia Pacific Index gaining 2.2 percent, its biggest gain in 2012. The Stoxx Europe 600 Index (SXXP) added 1.4 percent in London after yesterday’s 2.3-percent surge. Futures on the Standard & Poor’s 500 Index (SPXL1) advanced 0.3 percent. The index jumped 2 percent in New York yesterday. The ECB’s program will target sovereign bonds with maturities of one to three years in its most ambitious plan yet to save the euro.
The Sensex has climbed 14 percent this year, helped by the highest foreign inflows among 10 Asian markets, excluding China, tracked by Bloomberg. Overseas funds bought a net $24.7 million of shares on Sept. 6, taking their investment in local shares this year to $12.3 billion, data from the market regulator show.
India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index, sank 10 percent to 15.26, the lowest level in two years. The Nifty index rallied 2 percent to 5,342.10 while its September futures settled at 5,359.10. The BSE-200 Index (BSE200) added 1.7 percent to 2,152.54. India’s top two bourses traded 644 million shares yesterday, compared with a 12- month daily average of 885 million.
The Sensex advanced 1.5 percent this week after losing 2 percent last week, the most since such period ended May 11. The gauge trades at 14 times estimated earnings, compared with a multiple of 10.9 times for the MSCI Emerging Markets Index (MXEF), which has risen 5.6 percent in 2012.
All 30 Sensex stocks rose. ICICI Bank surged 4.6 percent to 937.85 rupees, the most since June 29. State Bank of India jumped 2.1 percent to 1,892.05 rupees, the most since Aug. 7.
Tata Motors, owner of British luxury car brands Jaguar and Land Rover, rallied 4.4 percent to 243.30 rupees, the most since June 15. Tata Steel Ltd. (TATA), India’s top steelmaker, soared 5.6 percent to 370.90 rupees, its biggest gain in six months.
Reliance Industries jumped 3.1 percent to 791.75 rupees, the most since Aug. 6. “Driven by gas price hike, rise in domestic gas production, higher contribution from shale gas and significant downstream expansions, we expect Reliance’s profits to nearly double over the next five years,” CLSA analyst Vikash Kumar Jain wrote in a note today while raising his price target on the stock to 850 rupees. He rates the stock outperform.
Engineering company Larsen & Toubro Ltd. (LT) gained 4.1 percent to 1,368.20 rupees. Sterlite Industries (India) Ltd. (STLT), the largest copper producer, climbed 3.1 percent to 96.55 rupees after copper prices rose, heading for the best week in 10, as the ECB’s bond-purchase plan to combat the debt crisis strengthened the demand prospect for metals. Aluminum maker Hindalco Industries Ltd. (HNDL) advanced 3.3 percent to 105.15 rupees.
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