Mumbai: Indian stocks rose, extending their steepest weekly gain in almost two months, as energy companies and lenders climbed amid surging foreign inflows.

The S&P BSE Sensex gained 0.4% in Mumbai on Monday, extending last week’s 1.5 percent rally. The S&P BSE India Oil & Gas Index rose to its highest level since January 2008, while a gauge of 10 lenders added 0.6% after surging 4% last week.

Foreign investors have been bullish on India amid prospects for higher economic growth and more reforms from Prime Minister Narendra Modi’s administration. Mark Mobius, the executive chairman of Templeton Emerging Markets Group, said on Friday that the South Asian nation is its top pick in emerging markets. Global funds have bought $7.45 billion of local shares this year, the most in Asia after Taiwan and South Korea, data compiled by Bloomberg show.

“The international situation is not getting worse and the global liquidity tap is likely to continue for some more time," Lancelot D’Cunha, chief executive officer at Crest Wealth Management Pvt., said by phone from Mumbai. “This has forced some investors to cover their short positions. Also, India is in a much better situation compared to its peers."

Asian equities capped their biggest weekly gain in a month last week as data showed Chinese economic growth is stabilizing while investors weighed the outlook for higher U.S. borrowing costs. Federal Reserve Bank of San Francisco President John Williams is the most recent official to comment, saying that slow growth is probably “here to stay" and repeating his support for a gradual increase in rates “sooner rather that later." The odds the US Federal Reserve will act by December climbed to 68% last week.

Traders and investors roll over their monthly derivatives contracts to the next month on the last Thursday of every month. The Sensex has rallied 23% from a February low. The Indian index trades at 16.5 times projected 12-month earnings, compared with a five-year average of 14.4 times. The MSCI Emerging Markets Index is valued at a multiple of 12.6. Bloomberg

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