Mumbai: India’s stocks rose the most this week as investors speculated domestic economic growth can be sustained even as borrowing costs rise and a sovereign debt crisis in Europe slows down a global recovery.

Tata Motors Ltd, the owner of JaguarLand Rover, climbed 2.9% after May sales rose.

Developing-nation stocks are probably “past the worst point", according to Antoine van Agtmael, the investor who coined the term emerging markets in 1981.

Reliance Communications Ltd (R-Com), a mobile phone operator, surged the most in at least a year after saying it received proposals from “reputed international telecom companies expressing interest in acquiring a strategic equity stake".

“Our market is likely to remain unaffected by the European crisis," said D.K. Aggarwal, who oversees funds for rich individuals as chairman of SMC Wealth Management Services Ltd in New Delhi.

Graphic: Ahmed Raza Khan/Mint

The benchmark Bombay Stock Exchange Sensex index gained 169.81 points, or 1%, to 16,741.84, the most since 28 May. The S&P CNX Nifty Index on the National Stock Exchange rose 1% to 5,019.85. The BSE 200 index increased 1% to 2,130.19.

Tata Motors added 2.9% to Rs746.15. The maker of the world’s cheapest car, the Nano, sold 41% more vehicles in May from a year earlier. The company on Wednesday opened a plant for a $2,500 version of the vehicle that will boost output amid rising demand for automobiles.

Hero Honda Motors Ltd, India’s biggest motorcycle maker, advanced 3.2% to Rs1,986.45 after sales climbed 13.9% in May. Maruti Suzuki India Ltd, the maker of half the cars sold in India, added 1.7% to Rs1,278.25. Mahindra and Mahindra Ltd, India’s largest maker of sport-utility vehicles and tractors, increased 1.8% to Rs574.55, its highest since January.

Easing growth and the effects of Europe’s debt crisis on exports and monetary policy mean there will be a “ceiling" on gains in emerging markets, van Agtmael, chairman and chief investment officer of Emerging Markets Management Llc, said in an interview with Bloomberg Television.

“In terms of the economy, the next three quarters will be slower than the past two quarters but no double dip," van Agtmael said. “In emerging markets, we are already past the worst point of this year."

Reserve Bank Of India deputy governor Subir Gokarn said on 26 May that the “pace and magnitude" of monetary policy actions will be “conditioned" by global developments. Policymakers have raised interest rates twice since mid-March by a quarter percentage point each time. The bank’s benchmark reverse-repurchase rate is now at 3.75%, while the repurchase auction rate is at 5.25%.

R-Com, India’s second largest mobile phone operator, soared 11.5% to Rs154.85, its biggest gain since May 2009. Emirates Telecommunications Corp., known as Etisalat, said Indian operators were among companies it was looking at for possible investment, according to Ahmed Bin Ali, group senior vice-president for communications.

The Times of India reported on Wednesday that Etisalat was in talks to buy a 25% stake in R-Com, citing people it didn’t identify.

Mahesh Prasad, president of R-Com, declined to comment. The company on Tuesday said reports it may restart merger talks with South Africa’s MTN Group Ltd were “speculation".

Bharti Airtel Ltd, India’s largest mobile phone operator, soared 5.2% to Rs270.35, its steepest climb since November. Idea Cellular Ltd jumped 9.1% to Rs53.45. Tata Teleservices Maharashtra Ltd added 3.6% to Rs20.

Overseas investors bought a net Rs800 crore ($169 million) of Indian equities on 31 May, increasing total purchases of the stocks this year to Rs21,400 crore, according to the nation’s market regulator.

Inflows from overseas reached a record Rs834.2 billion in 2009, exceeding the high set two years earlier in domestic currency terms, as the biggest rally in 18 years lured foreign funds. They sold a record Rs529.9 billion of shares in 2008, triggering a record annual decline.

Shree Renuka Sugars Ltd gained 4.5% to Rs63.65. The sugar refiner will buy 51% of Equipav SA Acucar and Alcool for 25% less than it agreed with the Brazilian sugar and ethanol producer, Valor Economico reported, without saying where it got the information.