Mumbai: Advance tax collections by some of the highest tax-paying firms based in India’s financial capital grew a collective 15% for the quarter ended September, suggesting that earnings are still on track for double-digit gains this year.

Stocks rose with the benchmark Sensex index gaining 155 points, or 0.8%, to close at 19,502.11.

“It’s a mixed bag, but numbers are in line with expectations," said Gopal Agrawal, who helps manage 277 crore as head of equities at Mirae Asset Global Investments (India) Pvt. Ltd.

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Firms in India pay income tax every quarter on their projected earnings. While these figures are used as a proxy for financial performance estimates, historically, the correlation has been mixed, analysts pointed out.

The consensus earnings growth forecast for fiscal 2011 is 20%. Although the Sensex is trading at an earnings multiple of 18.8 times, some market observers believe that a rise in profit will partly justify the recent rally.

“These numbers reinforce that second quarter (Q2) numbers would be fairly good," said Vikas Khemani, co-head of institutional equities at Edelweiss Securities Ltd.

Boosted by expectations of robust economic growth, Indian stocks have gained 7.35% in the last month, albeit as part of a worldwide rally.

They have shrugged off the mixed bag of results seen in the first quarter as well as expectations of a 25 basis points rate increase by the Reserve Bank of India in its mid-quarterly monetary policy review on Thursday, and gained 4.4% just in the last week alone.

One basis point is one-hundredth of a percentage point.

Sectors such as banking, financial services and auto makers have done well, while cement and commodity firms have seen a dip in tax paid.

Cement firms traditionally don’t do well during the September quarter because of the monsoon, while commodities firms’ numbers suffered from a dip in commodity prices

In Q2, State Bank of India (SBI), the country’s largest lender, is the highest taxpayer in the Mumbai circle at 1,924 crore, a gain of 5% from a year ago.

India’s most valuable firm Reliance Industries Ltd is the second largest taxpayer after SBI. It forked out 1,306 crore as tax this quarter, against 1,157 crore in the year-ago period.

Local banks and finance firms saw some of the largest increases in tax paid because they were able to maintain net interest margins by not raising deposit rates fast enough and credit flow increased, analysts said.

Among local lenders, Central Bank of Indiapaid 206 crore tax for this quarter, an increase of 160% over what it paid in September 2009. HDFC Bank Ltd paid 600 crore, a gain of 41%, while Yes Bank Ltd paid 105 crore, up by four-fifths.

Life Insurance Corp. of India is the third largest taxpayer in Mumbai, with an outgo of 1,067 crore, up nearly 11 times from a year ago.

“The collections are within expectations," said an income-tax official, who didn’t want to be named as he is not authorized to speak with the media.

Mint could gather data for only 44 companies, including 16 that form part of the Nifty index of the National Stock Exchange at the time of writing this report. A truer picture will emerge once tax officials collate the data for more firms.

The government has a direct tax target of 4.30 trillion this fiscal, around 11% more than last year’s target. Of the 16 Nifty firms whose advance tax figures are available, 12 have paid more tax. These firms together paid 10% more tax this quarter compared with a year ago.

Mahindra and Mahindra Ltd paid 158 crore, up 41%, and Tata Consultancy Services Ltd paid 260 crore, about one-fifth more than last year’s outgo.