Mumbai: India’s stocks advanced, with the benchmark index extending its biggest weekly rally since December, after Credit Suisse Group AG upgraded Wipro Ltd and higher oil prices boosted producers.
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Wipro, the nation’s third-biggest software services provider, surged the most since 22 November after Credit Suisse raised the stock to outperform from neutral. Oil and Natural Gas Corp. climbed the most in three weeks as concerns of supply disruptions in the Middle East drove oil prices higher. Stocks rose as President Pratibha Devisingh Patil said before a budget announcement next week that India’s priority is to slow inflation and sustain growth.
“It’s some sort of a pre-budget rally,” said Kaushik Dani, a Mumbai-based fund manager with Peerless Mutual Fund, which manages about $598 million in assets. “The budget is likely to give a clear picture on the government’s reform agenda. Recent declines have made software stocks attractive. They are catching up today.”
The Bombay Stock Exchange sensitive index, or Sensex, advanced 226.79 points, or 1.3%, to 18,438.31 at close in Mumbai.
The gauge climbed 2.7% last week, the most since the five days ended 3 December. The S&P CNX Nifty Index on the National Stock Exchange rose 1.1% to 5,518.60 points. The BSE 200 Index added 1% to 2,263.93.
The Sensex has lost 10% this year, making it the world’s worst performing benchmark index after Egypt and Tunisia in local currency terms on concern government measures to quell inflation will hurt economic growth. The gauge has slumped 12% from a 5 November record. Companies on the measure are valued at an average 17.3 times estimated earnings, down from last year’s high of about 21.5 times in March, according to data compiled by Bloomberg.
The fastest inflation rate in at least six years is reducing purchasing power in India, where the World Bank estimates more than three-quarters of the people live on less than $2 a day. The Reserve Bank of India, which has raised rates seven times in the past year, last month urged Finance Minister Pranab Mukherjee to cut subsidies to curb consumer demand and help cool inflation. Mukherjee is scheduled to unveil the budget on 28 February for the financial year starting 1 April.
“My government’s foremost priorities in 2011-2012 will be: to combat inflation,” Patil told Parliament on Monday at the start of the budget session. “To sustain the momentum of economic growth, while ensuring that the poor, the weak and the disadvantaged get a fair share in the fruits of growth.”
The Sensex index climbed 6.7% in March, the biggest monthly gain in six months, following the last budget announcement on 26 February as Mukherjee pledged to trim the fiscal deficit from a 16-year high, while boosting funds for roads, bridges and power plants. Wipro jumped 4.2% to Rs451.05. Credit Suisse increased the company’s share-price forecast to Rs575 from Rs515, analysts led by Bhuvnesh Singh wrote in a report on Monday, saying near-term sales may surprise on the upside.
Infosys Technologies Ltd, the second-largest software services provider, added 2.1% to Rs3,165.25, while larger rival Tata Consultancy Services Ltd. jumped 4.5% to Rs1,136.6, its steepest climb since 18 January. ONGC rallied 2.9% to Rs276.05, following a three-day decline. Reliance Industries Ltd, owner of the world’s largest refining complex, increased 2.2% to Rs956.35, its highest close since 25 January.
Separately BP Plc, Europe’s second-biggest oil company, agreed to pay Reliance $7.2 billion for stakes in 23 blocks in India, the two companies said after market.
Crude oil futures in New York jumped as much as 1.8% on speculation rising tensions in the Middle East and North Africa will disrupt crude oil shipments.
Libya, holder of the largest crude oil reserves on the African continent, has become the focal point of region-wide protests ignited by the ouster of Tunisia’s president last month and energized by the fall of Egypt’s President Hosni Mubarak on 11 February. Muammar Gaddafi’s son called on Libyan protesters to engage in dialogue or face a civil war that risks the country’s oil wealth.
Essar Oil Ltd rose 2% to Rs108.55. Essar Group, the owner of India’s second-largest non-state refinery, has offered to buy Royal Dutch Shell Plc’s Stanlow refinery for $350 million in cash, both companies announced on 18 February.
State Bank of India, the nation’s biggest lender, rose 1.1% to Rs2,791.85 after chairman O.P. Bhatt said fourth-quarter net interest margins may be higher than the previous quarter. Tata Motors Ltd, the biggest truckmaker and owner of Jaguar Land Rover, slumped 3.6 % to Rs1,161.75 after Goldman Sachs Group Inc. said the government may reverse tax cuts aimed at stimulating the economy. Hero Honda Motors Ltd, the country’s biggest motorcycle maker, sank 1.8% to Rs1,438.85.
“The possible reversal of stimulus by increasing excise duty on cars and two-wheelers by 2 percentage points will be passed on to consumers and could present challenges to demand growth and pricing power of companies,” Tushar Poddar, an economist at Goldman Sachs in Mumbai, wrote in a report on Monday.
Overseas funds bought a net Rs861 million of Indian equities on 17 February, paring total outflows from equities this year to Rs69 billion, according to data on the website of the Securities and Exchange Board of India.