Indian stocks climbed for the second day, led by consumer discretionary shares, as Titan Industries Ltd. (TTAN)’s earnings beat estimates and Maruti Suzuki India Ltd. (MSIL)’s sales surged last month.
Titan, the nation’s largest maker of branded jewelry by market value, advanced the most since February to a record after second-quarter profit rose 22 percent. Maruti, the biggest carmaker, climbed to a two-year high after October sales jumped. Wipro Ltd. (WPRO) gained the most in almost two months after approving the spinoff of its non-technology businesses.
About two stocks rose for each one that fell in the BSE India Sensitive Index (SENSEX), or Sensex, which gained 0.3 percent to 18,561.70 at the close in Mumbai. Earnings have trailed analyst estimates at three of 18 Sensex companies that have reported profit for the September quarter, compared with 40 percent in the three months to June, data compiled by Bloomberg show.
“The results have been in line or slightly ahead of what the street has been forecasting,” Rakesh Arora, head of research at Macquarie Capital Securities (India) Pvt., said in an interview with Bloomberg TV India today. “The chances of margin expansion plus interest rate cuts driving earnings growth are far more visible. The government is making serious efforts to kick-start the investment cycle, which would be good for growth.”
The S&P CNX Nifty Index (NIFTY) of 50 companies added 0.5 percent to 5,645.05 and its November futures settled at 5,675.25. The BSE-200 Index gained 0.6 percent and the BSE Mid-Cap Index climbed 0.9 percent. The National Stock Exchange of India and the BSE Ltd. traded 798 million shares yesterday, 13 percent less than the 12-month daily average.
The Sensex has increased 20 percent this year, driven by overseas fund purchases and government policy reforms announced since mid-September to revive the economy. Foreign funds bought a net $18.1 billion of local shares this year, the most among 10 Asian markets tracked by Bloomberg, excluding China.
“The sentiment among foreign investors on India is improving and now people are talking of recovery, the investment cycle and interest-rate cuts,” Macquarie’s Arora said. “Foreign inflows have been strong and continue to drive Indian markets.”
Prime Minister Manmohan Singh started the biggest policy overhaul in a decade on Sept. 13, including fuel-subsidy curbs and a push to spur investment in domestic industries, in an effort to snap months of policy gridlock. The nation’s central bank on Oct. 30 resisted calls from Finance Minister Palaniappan Chidambaram for lower interest rates to boost growth. The Sensex had its biggest rally in eight months in September before declining 1.4 percent last month.
“The risks seem to outweigh the positives which might keep coming out of the government’s decision-making,” Rahul Singh, head of research at Standard Chartered Securities (India) Ltd., said in an interview with Bloomberg TV India today. “Part of the excitement on India unlike the other markets has been that we have probably reached a bottom of the policy cycle and the peak of the rate cycle. While both have shown signs of reversing we still need to get much more conviction on both.”
Chidambaram and Singh’s prescription for reviving growth will face its first test when parliament reconvenes. Opposition parties are threatening a no-confidence vote when lawmakers meet for the winter session scheduled to begin on Nov. 22.
Central bank Governor Duvvuri Subbarao kept the repurchase rate at 8 percent on Oct. 30 to damp price increases, while reducing the cash reserve ratio to 4.25 percent from 4.5 percent to support lending. Borrowing costs have remained unchanged since a 50 basis-points cut in April.
The Reserve Bank of India this week forecast economic growth of 5.8 percent for the year through March 2013, the slowest since 2003, and increased its inflation estimate to 7.5 percent from 7 percent.
“Rising and stubborn” inflation remains a concern, Subbarao said in an interview with Bloomberg TV India yesterday. Price growth needs to slow to 5 percent, he said, adding that the central bank may not wait for inflation to reach that level before easing monetary policy further.
Overseas funds sold $29 million of domestic shares yesterday, a third day of net sales, data from the market regulator show. The Sensex is valued at 14.8 times estimated earnings, compared with a multiple of 11.4 times for the MSCI Emerging Markets Index (MXEF), data compiled by Bloomberg show.
Titan, part of the Tata Group, jumped 10 percent to 285.15 rupees, extending this year’s rally to 67 percent. Second- quarter net income rose 29 percent to 1.8 billion rupees, beating the 1.7 billion-rupee estimate of analysts.
Maruti added 1.5 percent to 1,459.75 rupees after its sales surged 86 percent last month. Tata Motors Ltd. (TTMT), the biggest truckmaker and owner of Jaguar Land Rover, surged 5 percent to 267.45 rupees, its steepest jump since Sept. 12. Mahindra & Mahindra Ltd. (MM), the largest maker of sport-utility vehicles and tractors, increased 1.7 percent to 899.80 rupees after sales climbed 29 percent last month. The three carmakers are among the 10 best performers on the Sensex this year.
Wipro rallied 3 percent to 361.25 rupees. The separation of its consumer care and lighting businesses will help billionaire Chairman Azim Premji increase his focus on the information technology business, which accounted for 86 percent of Wipro’s 372 billion-rupee ($6.9 billion) revenue in the year ended March 31. The company will announce its second-quarter earnings report tomorrow.
Reliance Industries Ltd. (RIL), owner of the world’s largest refining complex, added 0.2 percent to 807.10 rupees, erasing an intraday drop of as much as 2.1 percent. The company limited production from its KG-D6 project in an attempt to raise gas prices, anti-corruption activist Arvind Kejriwal said yesterday at a news conference. Reliance said the charges are “devoid of any truth or substance.”
Oil & Natural Gas Corp. (ONGC), India’s largest oil explorer, declined 1.4 percent to 264.85 rupees, its fifth day of losses. ITC Ltd. (ITC), the biggest cigarette company, slid 1.2 percent to 279.30 rupees.
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