Indian stocks advanced amid optimism the government may be able to push through its plan to allow foreign investment in the nation’s retail industry after the parliament began debating the issue today.
The BSE India Sensitive Index (SENSEX), or Sensex, rose 0.2 percent to 19,348.12 at the close, holding at its highest level in 19 months set after jumping 4.5 percent last week. Reliance Industries Ltd. (RIL), the owner of the world’s largest oil-refining complex, climbed 2.6 percent, the most since Sept. 17. Tata Power Co. (TPWR), the largest non-state generator, rallied 3.9 percent.
The Sensex increased last week as data showing economic expansion slowed last quarter to match a three-year low stoked speculation the government will take more steps to boost growth and investment. A political deadlock ended after the government agreed last week to demands by the opposition for a vote on its decision to allow foreign firms to set up supermarkets.
“The stock markets will cheer it if there is a political consensus on reforms,” Anita Gandhi, a director at Arihant Capital Markets Ltd. in Mumbai, said by phone. “Investors will focus on the progress of this debate and the subsequent vote.”
The debate in the lower house began at 2 p.m. local time, while voting will take place tomorrow. The Sensex swung between gains and losses at least 15 times before the debate began.
The 30-stock gauge has climbed 25 percent this year, driven by foreign flows and policy measures announced by the government since September. Overseas funds bought $145 million more stocks than they sold on Dec. 3, taking net purchases in 2012 to $20.2 billion, the most among 10 Asian markets tracked by Bloomberg, excluding China, data compiled by Bloomberg show.
Prime Minister Manmohan Singh began the biggest policy overhaul in a decade in mid-September, including fuel-subsidy curbs and a push to spur foreign investments to revive growth. Gross domestic product grew 5.3 percent in the quarter ended Sept. 30 from a year ago, down from 5.5 percent the previous quarter, government data showed last week.
Parliament has been repeatedly adjourned since reconvening on Nov. 22 as opposition groups accused the government of reneging on its promise to win legislative support for the retail policy. Singh gave ground as allies and regional parties signaled they are unlikely to vote against the ruling bloc.
The government is “confident of numbers,” Singh said on Nov. 27 when asked if he’d be able to muster enough support to win the vote. The retail policy, which state assemblies can refuse to implement, will enable companies including Wal-Mart Stores Inc. (WMT:US) to step up their presence in the world’s second-most populous nation.
Reliance Industries climbed 2.6 percent to 824.70 rupees after a report said the nation’s oil ministry may approve the company’s investment in satellite fields and R-series wells in the KG-D6 block. The stock was rated equal-weight in new coverage at Barclays Plc by equity analyst Somshankar Sinha, with a price estimate of 850 rupees a share.
Tata Power rallied 3.9 percent to 111.65 rupees, the highest close in nine months. Oil and Natural Gas Corp. added 1.2 percent to 265.25 rupees, a one-month high. The stock was rated equal-weight in new coverage at Barclays with a price estimate of 295 rupees a share.
State Bank of India and ICICI Bank Ltd. (ICICIBC), the nation’s top two lenders, advanced 1.6 percent each. SBI rose to 2,239.55 rupees and ICICI Bank increased to 1,119.35 rupees.
Thirty-day volatility in the Sensex was at 11.01, compared with the year’s lowest reading of 9.06 set on Nov. 26, the data show. The gauge trades at 15.8 times estimated earnings, the highest level since February. The MSCI Emerging Markets Index (MXEF) trades at a multiple of 11.7 times.
The S&P CNX Nifty Index (NIFTY) on the National Stock Exchange of India Ltd. added 0.3 percent to 5,889.25, while its December futures settled at 5,923.65. India VIX, which measures the cost of protection against declines in the Nifty, jumped 1.9 percent to 15.91.
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