BackSensex rallies as banks surge on plan to boost capital
Govt is boosting its allocation after central-bank data showed bad debts climbed to the highest level in 13 years and capital ratios declined
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Mumbai: Indian stocks climbed the most in about three months after the government sought to boost the size of an annual capital injection into state-owned lenders amid an increase in stressed assets.
State Bank of India surged the most since February, while ICICI Bank Ltd., the largest private lender, climbed the most in three months after reporting a record quarterly profit. Dr. Reddy’s Laboratories Ltd. headed for an all-time high after its earnings beat forecasts, while Hero MotoCorp Ltd., a motorcycle maker, jumped the most in 10 months.
The S&P BSE Sensex ended up 1.48% to 28,114.56 in Mumbai, erasing a weekly and monthly loss. The ministry wants to raise the cash to be injected into lenders in the year to 31 March to Rs12,010 crore ($1.87 billion), according to document tabled in Parliament on Friday. The state is boosting its allocation after central-bank data showed bad debts climbed to the highest level in 13 years and capital ratios declined.
“The capital infusion plan as well as hope of a rate cut in Tuesday’s monetary policy meeting" have spurred advances in banks, Vaibhav Sanghavi, managing director at Ambit Investment Advisors Pvt. in Mumbai, said by phone.
State Bank jumped 6.3%, the best performer on the Sensex. United Bank of India rallied 5.3%, Oriental Bank of Commerce surged 5.5% and Indian Overseas Bank added 3%. The government set aside Rs6,990 crore for state lenders in the fiscal year that ended March, which was the lowest total since at least 2009. The proposed increase needs approval from lawmakers.
Earnings scorecard
ICICI Bank increased 4.6%, the most since 28 April. First-quarter profit of Rs2,980 crore exceeded the median estimate of Rs2,920 crore in a Bloomberg survey.
Twelve of the 17 Sensex firms, or 71%, that have posted results for the June quarter have matched or exceeded estimates, compared with 40% in the March quarter.
The Sensex erased the week’s losses after Federal Reserve on Wednesday refrained from providing timing for raising the near-zero US rates that have helped fuel capital flows into emerging markets. Foreigners have injected $886 million into Indian stocks this month, the only inflows among eight Asian markets tracked by Bloomberg.
“On the capital flows, we seem to be doing alright," Mahesh Nandurkar, a strategist at CLSA Asia-Pacific Markets, said in an interview on Thursday. “India stands out in the sense that it has relatively lower exports or exposure to the rest of the world."
The Sensex has gained 2.2% this year and trades at 15.7 times projected 12-month earnings. The MSCI Emerging Markets Index is valued at a multiple of 11.2. Bloomberg
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