India’s stocks rose, led by banking shares amid speculation recent declines prompted by concern over inflation may have been excessive.
ICICI Bank Ltd, the nation’s second-largest lender, surged 2.7%, trimming this year’s decline to 8.3%. HDFC Bank Ltd, climbed 2%, paring its loss this year to 9.8%.
Finance minister Pranab Mukherjee today said the government will take all appropriate steps to control inflation. Kotak Mahindra Bank Ltd and LIC Housing Finance Ltd gained after posting higher third-quarter net income.
“We are seeing short-covering in banking stocks,” said Sunil Pachisia, vice-president at Mumbai-based brokerage Pratibhuti Viniyog Ltd.
“Some investors were unduly pessimistic on banks, but the banking results have been good. So, the short-term investors were forced to cover their positions.”
The Bombay Stock Exchange sensitive index advanced 68.22 points, or 0.4%, to 19,046.54 points, at the 3:30 p.m. close in Mumbai, after earlier falling as much as 1%.
The measure dropped 4.2 % last week, ending 10% below the 5 November record, a slump that signifies a so-called correction to some investors and analysts.
Stocks have retreated amid concern inflation will erode profit growth and lead to higher borrowing costs.
The S&P CNX Nifty Index on the National Stock Exchange climbed 0.4% to 5,711.60 points. The BSE 200 Index gained 0.3% to 2,358.51 points.
Companies on the Sensex are valued at an average 18 times estimated earnings, down from last year’s high of 21.5 times in March, according to data compiled by Bloomberg. ICICI rose 2.7% to Rs1,050.55. HDFC Bank advanced 2% to Rs2,117.55. Housing Development Finance Corp., the biggest mortgage lender, added 1.2% to Rs660.6. State Bank of India, the biggest lender, advanced 1.3% to Rs2,535.05.
“A lot of investors were waiting for an opportunity to buy banking stocks at lower levels as financials have the highest weight on the index,” said Anish Jhaveri, chief executive officer at Mumbai-based Antique Stock Broking Ltd.
He favors shares of State Bank of India and Tata Consultancy Services Ltd, among others.
The Bombay Stock Exchange Bankex index rose 1.7%, reversing an earlier decline of as much as 1.1%.
“Some traders were covering so-called short positions, or bets that prices will fall,” Pratibhuti Viniyog’s Pachisia said.
Kotak Mahindra Bank Ltd. rallied 1.3% to Rs418.9. Third-quarter net income climbed 16% to Rs384 crore ($84 million), it said in a filing on Thursday.
LIC Housing added 2.3% to Rs174.25. “Excluding one-time provision costs, the earnings exceeded expectations,” said Santanu Chakrabarti, an analyst with IIFL Capital Ltd in Mumbai.
Profit rose to Rs213 crore, or Rs22.49 a share, in the three months ended in December, from Rs154 crore, or Rs16.18, a year earlier, the Mumbai-based company said in a statement on Wednesday after market hours.
“Operating performance is very good and we remain bullish on the company,” Chakrabarti said.
“The growth outlook should remain robust and stock is attractively valued.”
India’s food inflation slowed for a second week after Prime Minister Manmohan Singh’s government raided traders to prevent hoarding of farm goods and banned onion exports. An index measuring wholesale prices of agricultural products rose 15.52% in the week ended 8 January from a year earlier, the commerce ministry said on Thursday.
The gauge gained 16.91% in the previous week.
Global funds bought a net Rs176 crore of Indian equities on 18 January, the first inflow in 10 days, according to data on the website of the market regulator Securities and Exchange Board of India.
Hemal Savai and Shikhar Balwani in Mumbai also contributed to this story