Mumbai: Indian stocks advanced the most in a week as the rupee surged the most in 27 years and oil prices declined. Banks and energy companies led the gains.

HDFC Bank Ltd climbed for the second day, helping the S&P BSE Bankex halt a three-day 7.5% slide. Reliance Industries Ltd (RIL), owner of the world’s largest refining complex, increased the most in three months. Sesa Goa Ltd, an iron-ore miner, jumped to a seven-month high, sending a gauge of metal companies to its highest level in more than two months.

The S&P BSE Sensex jumped 2.3%, or 404.89 points, to 18,401.04 at the close, while the National Stock Exchange’s broader 50-share index, the Nifty, rose 2.35%, or 124.05 points, to 5,409.05.

The benchmark Sensex opened 0.43% higher at 18,073.66 points against its Wednesday’s close of 17,996.15. Among sectoral indices, the BSE Oil and Gas index gained the most, 2.86% to 8,094.62 points, while the BSE Realty index lost the most, 0.36% to 1,174.45 points.

The rupee gained the most since 1986 after the central bank said it will sell dollars to the state oil importers after the currency sank the most in two decades on Wednesday. The Sensex has slid 5% this month, pulling valuations to 7% below the five-year average, amid concerns the rupee’s rout and elevated oil prices will hamper government efforts to cool inflation and narrow an unprecedented current-account deficit.

A weakening currency makes imports more expensive for a country that imports 80% of its oil. Brent crude for October settlement slid as much as 1.4% to $114.94 a barrel after closing on Wednesday at the highest since 19 February. The rupee surged 3.4% to close at 66.595 per dollar. It slumped 3.9% to a record 68.845 on Wednesday.

Valuation contracts

The currency has still depreciated 17% this year, eroding dollar-based investments by 22% from Sensex shares, data compiled by Bloomberg show. The Sensex’s valuation has dropped to 13.1 times estimated 12-month earnings, compared with the five-year average of 14.1 times.

HDFC Bank climbed 1.8% to 572.1, the most since 23 August. The Bankex gained 1.6%, the first day of gain in four days. The gauge has slumped 29% this year on concern the economic slowdown will increase bad debts in the banking system. Housing Development Finance Corp. Ltd (HDFC) surged 6.6% to 695.5, ending a two-day, 12% slump that was the most since March 2009.

RIL gained 4.1% to 845.25. Oil and Natural Gas Corp. Ltd (ONGC), the largest explorer, advanced 2.1% to 248.7, ending a three-day, 12% slide that was the most since November 2008. GAIL India Ltd climbed 2.4% to 288.8, its first gain this week.

Metals, telecom

Sesa Goa jumped 13.8% to 192.45, the highest close since 15 January. Aluminum maker Hindalco Industries Ltd rallied 4.9% to 107.1, a three-month high. The BSE India Metal index jumped to the highest since 19 June.

Bharti Airtel Ltd, India’s biggest mobile-phone company, surged 4% to 299.4, ending a four-day, 8% slide. Reliance Communications Ltd, the third-largest, jumped 8.9% to 121.2, the most since 31 July.

“Today’s gain in the Sensex came amid expiry of monthly derivative contracts," Anand Tandon, chief executive officer of JRG Securities Ltd, said on Bloomberg TV India. Futures and options contracts expire on last Thursday of every month.

“It has been a weak month, so it is not surprising that expiry is somewhat strong," he said. “Given the general gloom and doom, it is unlikely the September series will be positive."

Data on Friday may show economic expansion slowed to 4.6% in the quarter ended 30 June, from 4.8% in the previous three months, according to the median estimate of 43 analysts in a Bloomberg survey. That would be the slowest pace of expansion since the quarter ended March 2009.

The slowdown and a weak rupee are hurting company profits. About 47% of Sensex companies that reported earnings for the June quarter missed analyst estimates, compared with 27% for the March quarter, data compiled by Bloomberg show.

Foreign funds sold a net $208.1 million of Indian shares on 27 August, a seventh straight day of sales, paring this year’s inflow to $11.6 billion. That’s still the second-highest among 10 Asian markets tracked by Bloomberg.

The Reserve Bank of India (RBI) on Wednesday said it will sell the US currency to Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd, which the central bank will repurchase after a specified period. The measure, effective immediately, will extend until further notice and will be available to the companies through a designated bank, the RBI said. Bloomberg

Mint’s Ravindra Sonavane contributed to this story.

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