Mumbai: India’s benchmark stock index rose to the highest level in two months, paring a quarterly decline, as concerns of a Greek debt default eased and overseas funds increased their holdings of local shares.
DLF Ltd, India’s biggest developer, climbed for the first time this week after Nomura Holdings Inc. advised investors to “buy” the shares. Hindustan Unilever Ltd, the biggest home products maker, reached a record.
Foreigners have become net buyers of local stocks this year since 27 June, reversing their stance for first time in three weeks. India’s food inflation slowed to a six-week low.
The Bombay Stock Exchange (BSE) sensitive index, or Sensex, rose 152.01 points, or 0.8%, to 18,845.87, its highest close since 2 May. The gauge has risen 6.5% in the past five days. It has fallen for a second straight quarter, losing 8.1% over the six-month period. The MSCI Emerging Markets Index has lost 0.7% in the period.
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“We believe the concerns are easing,” Swati Kulkarni, a fund manager at UTI Asset Management Co. Ltd, said by phone from Mumbai. “We’re more optimistic about the second half of the year. Inflationary pressure has softened and that’s a silver lining. We will get more foreign money” if the growth target of 8.5% is achieved, she said.
The S&P CNX Nifty Index on the National Stock Exchange added 0.2% to 5,613.45. The BSE-200 Index added 0.2% to 2,305.92.
Overseas funds bought a net Rs 770 crore of Indian stocks on Wednesday, raising total investment in equities this year to Rs 2,670 crore, data compiled by the regulator show. India’s rupee is set for a monthly gain, aided by flows from overseas investors.
“The Greece problem looks temporarily resolved and that allows the market to focus on fundamentals such as India’s relative economic strength,” Krishnamurthy Harihar, treasurer at FirstRand Ltd, said in Mumbai. “Fund flows are back.”
India’s $1.3 trillion economy expanded 7.8% in the three months ended March, the second fastest pace among Asia’s 10 biggest economies. The nation may achieve its growth target for this year even after the longest string of interest-rate increases in a decade, finance minister Pranab Mukherjee said in a Bloomberg News interview on 28 June in Washington.
DLF rose 0.7% to Rs 210.45, paring this year’s loss to 28%. Nomura increased its price estimate to Rs 270 from Rs 253.
State Bank of India rose 0.9% to Rs 2,400. Hindustan Unilever surged 3.3% to Rs 343.65, the highest price since Bloomberg began compiling data in 1991. The stock is the best performer on the Sensex this quarter with a 20% advance.
ITC Ltd added 1.7% to Rs 202.95. The stock is the best performer on the Sensex this year with a 16% gain. Hero Honda Motors Ltd rose 1.5% to Rs 1,877.2 and is the second best performing stocks on the Sensex this quarter.
The Sensex has dropped 8.1% this year, the worst performer among benchmark indices in the 20 biggest markets, as the Reserve Bank of India has raised rates 10 times since the start of 2010 to cool inflation.
Companies on the Sensex are valued at 15.3 times estimated earnings, compared with 10.7 for the MSCI Emerging Markets Index.
Rupee snaps three quarters of gains; oil, rains key
The Indian rupee weakened in the June quarter, ending the rise registered in the previous three quarters, as local shares dragged, but the euro’s surge during the period helped limit the fall, traders said. The partially convertible rupee ended 44.6950/7050 per dollar, 0.4% higher from Wednesday’s close of 44.86/87, but 0.25% weaker quarter-on-quarter. It rose as much as 44.6650 on Thursday—a level not seen since 15 June. The intra-day rise was aided by the euro, which rose to a three-week high against the dollar on Thursday and headed for a second quarterly gain. Global oil prices and progress of the south-west monsoon would be key to the rupee’s direction in the September quarter, analysts said.
Bond yields post biggest quarterly rise in one-and-a-half years
India’s benchmark 10-year federal bond yield posted its single-biggest quarterly rise in one-and-a-half years in the June quarter as the Reserve Bank of India kept up its anti-inflationary stance, with heavy supplies also dampening demand for debt.
Quarter-end buying to enhance treasury profits saw bond yields end off the day’s high on Thursday, even though a Rs 15,000 crore bond sale and worries over high inflation persisted. The 10-year Indian benchmark bond yield ended up 1 basis point on the day at 8.33%.
The 10-year yield rose 35 basis points in the June quarter, its biggest quarterly rise since the December 2009 quarter, after moving in a 7.46-8.47% range.
Graphic by Ahmed Raza Khan/Mint
Anil Varma and Santanu Chakraborty in Mumbai contributed to this story.