Mumbai: Indian stocks reached a three-month high, extending a two-week rally, on expectations that the nation’s economic expansion and corporate earnings will withstand oil prices at the highest levels in 30 months.
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Hero Honda Motors Ltd, the nation’s largest motorcycle maker, advanced for the 10th day, its longest winning streak in at least two decades, after sales surged 24% to a record in March. Bharat Heavy Electricals Ltd (Bhel), the biggest maker of power equipment, added 2.3% after reporting profit that rose at the fastest pace since 2007. Wipro Ltd paced gains among software exporters after saying it agreed to buy Saic Inc.’s information technology unit that provides services to oil and gas companies for $150 million in cash. The country’s economic growth has exceeded 8% in the past four quarters.
“The auto numbers and some of the results have created a positive sentiment; it’s sort of a pre-earnings rally,” said Kaushik Dani, a Mumbai-based fund manager with Peerless Mutual Fund, which has about $1.1 billion in assets. Concerns over crude oil have taken a back seat for the moment. He favours shares of auto makers, lenders and software companies.
The Bombay Stock Exchange (BSE) sensitive index, or Sensex, gained 281.34 points, or 1.5%, to 19,701.73. The index is at its highest level since 6 January and today’s rally pared this year’s loss to 3.9%. The gauge added 3.2% last week, its second week of advance. The S&P CNX Nifty on the National Stock Exchange rose 1.4% to 5,908.45, while its April futures settled at 5,948. The BSE-200 Index gained 1.4% to 2,418.43.
Hero Honda added 0.98% to Rs1,618.30. Maruti Suzuki India Ltd, the largest car maker, rose 2.07% to Rs1,300.70.
Mahindra and Mahindra Ltd jumped 4.75% to Rs743.85, its highest close since 25 January. The top maker of sport-utility vehicles and tractors was rated a buy in new coverage at Kim Eng Securities India Pvt. Ltd by analysts Jigar Shah and Vedant Agarwal. Growing rural incomes would support earnings per share growth of 17-20% over the next two years, the analysts said in a report on Monday, setting a price estimate of Rs845 for the stock.
Bhel climbed 2.84% to Rs2,173.80. Net income in the 12 months ended 31 March climbed 40% to Rs6,020 crore, or Rs123 per share, the company said in a statement to BSE on Monday.
The state-run company gives provisional annual earnings in the first week of April every year, before announcing audited fourth quarter earnings later in the month.
Wipro added 1% to Rs480.55. Infosys Technologies Ltd, the second largest software services provider, added 2.04% to Rs3,283.85, while rival Tata Consultancy Services Ltd gained 2.7% to Rs1,211.50. Indian software companies get at least three-quarters of their sales from abroad.
The rally in Indian equities mirrored advances in Asian stocks, which drove the regional benchmark to the highest level since last month’s earthquake in Japan as US jobs grew faster than forecast. The MSCI Asia Pacific Index advanced 0.6%.
Crude for May delivery jumped as much as 0.8% to $108.78 per barrel in New York, the highest price since September 2008, on speculation fuel demand may increase in the US, the biggest consumer. Prices are up 25% from a year earlier.
National Aluminium Co. Ltd gained 2.2% to Rs98.30. The nation’s second biggest producer said cast-metal output reached a record 443,597 tonnes in fiscal 2011 from 431,488 tonnes in fiscal 2010. The company also raised prices by 1.8%, it said in a statement on its website.
The Sensex rallied 9.1% in March, the top monthly gain since September. The gauge has still declined 5.1% this year as concerns that rising borrowing costs will crimp economic expansion. The loss is the first since a 25% slump in the fourth quarter of 2008.
Companies on the benchmark trade at an average 15.5 times estimated earnings, compared with 21.5 times in March 2010, data compiled by Bloomberg show.
Overseas funds purchased a net Rs1,040 crore of Indian stocks on 30 March, reducing their outflow from equities this year to Rs2,500 crore, according to the website of the Securities and Exchange Board of India. Foreign investors put a net $1.6 billion in the nation’s equities in March after pulling out $2.2 billion in January and February.
India’s economic expansion and corporate earnings lured foreign funds to buy a record $29.4 billion of local equities last year and made the Sensex the best performer and most expensive among the world’s 10 biggest markets.
Graphic by Yogesh Kumar/Mint