Mumbai: Indian stocks climbed, tracking a rebound in Asian equities on optimism that German lawmakers will approve the expansion of a bailout fund for Europe’s debt-stricken countries, and as a top government official said the Indian economy may turn around soon.
Infosys Ltd rallied 3.3%, pacing advances among software services exporters on speculation a decline in the rupee will make them more competitive. “India is a haven of relative safety,” Kaushik Basu, chief economic adviser in the finance ministry, said on Thursday. ITC Ltd, Asia’s second-largest cigarette maker by market value, advanced 2.7%.
“We have seen a substantial sell-off and this is the time for investors to pick stocks,” Gurunath Mudlapur, managing director at Atherstone Capital Markets Ltd in Mumbai, said by phone. “Markets are tired of getting negative news.”
Naveen Kumar Saini/Mint
The BSE sensitive index, or Sensex, jumped 252.05 points, or 1.5%, to 16,698.07, its highest level since 21 September. The measure’s gain outweighed speculation the central bank may increase borrowing costs further after food inflation accelerated for the first time in four weeks.
The MSCI Asia Pacific Index reversed losses of as much as 1.3%, gaining 0.4% to 114.27. The S&P CNX Nifty on the National Stock Exchange (NSE) advanced 1.4% to 5,015.45, while its October futures traded at 5,036. The BSE-200 Index added 1.1% to 2,054.98.
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German lawmakers backed an enhanced euro area rescue fund minutes after Indian markets closed as European officials turn to look at what next steps may be needed to stem the region’s debt crisis.
The Sensex has declined 19% this year on concerns that the European crisis, slowing US growth and the Reserve Bank of India’s record series of rate increases will crimp company earnings. The measure has retreated 11% this quarter, set for its steepest loss since the three months ended December 2008. Sensex companies trade at 14.1 times future profits, compared with 9.5 times on the MSCI Emerging Markets Index.
Overseas funds turned net sellers of Indian equities on 26 September, according to data from the market regulator. They withdrew a net $2.4 billion from local stocks in August, the biggest outflow since October 2008.
The Reserve Bank has increased borrowing costs by a total of 350 basis points starting mid-March 2010 to tame the fastest inflation among the so-called Brics economies.
RBI governor D. Subbarao last raised rates by 25 basis points to 8.25% on 16 September as wholesale price inflation reached a 13-month high of 9.78% in August, staying above 9% for a ninth straight month.
An index measuring wholesale prices of farm products rose 9.13% in the week ended 17 September from a year ago, the trade ministry said on Thursday. The gauge climbed 8.84% the previous week.
Concern over a possible Greek default is dragging global stocks toward the biggest quarterly loss since 2008. Global investors anticipate Europe’s debt crisis leading to an economic slump, a financial meltdown and social unrest in the next year, with 72% predicting a country abandoning the euro as a currency within five years, a Bloomberg survey found.
“There is a risk aversion trade going on globally,” Mohit Mirchandani, head of investments, portfolio management services at Religare Asset Management Co., said by phone from Mumbai. As long as the global uncertainty remains, there is likely to be a flight of capital from riskier assets, including emerging market equities.
Infosys rallied 3.3% to Rs 2,551.10, the highest since 5 August. Tata Consultancy Services Ltd (TCS), the largest, gained 1.3% to Rs 1,061.45.
The currency completed its worst week in 18 years on 23 September, losing 4.6%. A weaker rupee boosts earnings of top Indian software exporters such as Infosys and TCS, which get about three quarters of their revenue from overseas, mostly the US and Europe.
ITC Ltd climbed 2.6% to Rs 202.25, the highest since 6 September. The company bought a 26% stake in a 275-room, five-star luxury hotel property being developed by Noida-based Logix Group, The Economic Times reported on Thursday, citing a person it didn’t identify.
HDFC Bank Ltd, India’s second-largest private lender, advanced 2.8% to Rs 470.60, the most since 7 September, while ICICI Bank Ltd, the largest private lender, advanced 2.5% to Rs 890.70. Jaiprakash Associates Ltd, a builder of dams, surged 6.8% to Rs 74.75, its highest close since 26 July.
Foreign funds bought a net Rs 88.7 crore of stocks on 27 September, paring their outflow from local stocks this year to Rs 544 crore, according to data from the market regulator.
Santanu Chakraborty contributed to this story.