Mumbai: Indian stocks climbed, paring the benchmark index’s biggest monthly loss since January, as gains in Asian equities prompted some investors to overlook data that showed the nation’s economic expansion slowed last quarter.
The MSCI Asia Pacific Index gained 1.4%, heading for its highest close since 12 May, amid speculation that European officials will sanction more assistance for Greece. India’s gross domestic product (GDP) rose 7.8% in the three months ended March from a year earlier, after a revised 8.3% gain in the previous quarter, the government said on Tuesday. HDFC Bank Ltd, the second largest private lender, jumped 4%, pacing gains among banks. ITC Ltd, Asia’s second largest cigarette maker by market value, rallied 3.1%.
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“The markets have been discounting some sort of a slowdown and frankly, the event is behind us now without any negative surprises,” Raamdeo Agrawal, managing director at Mumbai-based Motilal Oswal Securities Ltd, said by phone. Gains in regional markets have helped Indian equities today, he added.
The Bombay Stock Exchange (BSE) sensitive index added 271.22 points, or 1.5%, to 18,503.28, its highest close since 13 May.
The gauge lost 3.3% this month, the most since the 11% slump in January. The S&P CNX Nifty on the National Stock Exchange rose 1.6% to 5,560.15. Its June futures traded at 5,552.20. The BSE-200 Index added 1.6% to 2,301.65, its highest close since 2 May.
The Sensex has lost 10% year amid concerns that higher borrowing costs will hurt corporate earnings. Equities on the measure are valued at an average 14.9 times estimated profit, down from 21.5 times in March 2010, last year’s high. The MSCI Emerging Markets Index trades at 11.2 times earnings.
India’s interest rate cycle is close to its peak level, signalling limited scope for further increases from current levels, Mumbai-based broker K.R. Choksey Shares and Securities Pvt. Ltd said in an note on Tuesday after the government’s GDP report.
The nation’s central bank boosted benchmark rates on 3 May for the ninth time in 15 months, and forecast inflation will remain at an elevated level until at least September. The Wholesale Price Index, which rose 8.66% in April from a year earlier, has stayed above 8% for 16 straight months.
Abatement of fear of a sharp rate hike may be a short- term relief to the markets, the brokerage said.
ITC rallied 3.1% Rs193.35, the most in more than three months. Jaiprakash Associates Ltd rose 5% to Rs86.55, the most since 13 April.
Asian stocks gained on speculation that European nations will pledge additional aid to ease Greece’s credit crisis. European Union leaders will decide on additional aid for Greece by the end of June and have ruled out a total restructuring of the nation’s debt, said Jean-Claude Juncker, head of the euro-area finance ministers’ group.
The 7.8% for India’s economy is the slowest pace in five quarters and lower than median of 22 estimates in a Bloomberg survey for an 8.1% gain. GDP grew 8.5% in the year ended March, a growth that is still the fastest after China among major Asian economies.
The market is building in an economic growth of somewhere around 8% to 8.2% going forward, said Aneesh Srivastava, who oversees $465 million as chief investment officer at IDBI Federal Life Insurance Co. Ltd.
HDFC Bank paced gains among lenders, jumping 4% to Rs2,399.55, the most since 1 March.
State Bank of India, the nation’s largest lender, rose 2.7% to Rs2,297.95, the most in two months, while Housing Development Finance Corp. Ltd, the largest mortgage lender, advanced 2.3% to Rs684.05.
Jindal Steel and Power Ltd, the second biggest producer of the alloy by value, gained 2.2% to Rs649.20. DLF Ltd, the biggest real estate developer, surged 3.2% to Rs238.95, advancing for a fourth straight day.
Overseas investors bought a net Rs254 crore of Indian equities on 27 May, paring total outflows from equities this year to Rs2,020 crore, according to data on the website of the Securities and Exchange Board of India.
Graphic by Yogesh Kumar/Mint