Stocks in India Gain for First Day in Four as Valuations Near Two-Year Low

By Rajhkumar K Shaaw - Jul 13, 2011

Indian stocks climbed, halting a three-day decline, as overseas investors bought shares after valuations approached a two-year low and a drop in industrial output prompted speculation the central bank will pause after the longest stretch of rate increases in a decade.

DLF Ltd. (DLFU), the nation’s biggest developer, advanced 1.6 percent. Mahindra & Mahindra Ltd. (MM), the largest maker of sport- utility vehicles and tractors, added 1.4 percent.

The Bombay Stock Exchange Sensitive Index, or Sensex, gained 126.2, or 0.7 percent, to 18,537.77 at 9:48 a.m. in Mumbai. The gauge lost 3.5 percent in the three days through yesterday and traded at 14.9 times estimated profit, within 10 percent of the lowest level since May 9, 2009, data compiled by Bloomberg show. Foreign funds have been net buyers of domestic stocks for 13 sessions, the longest stretch in three months.

“Indian equities continue to be driven by foreign fund flows,” said R.K. Gupta, managing director of Taurus Asset Management Ltd., which has $1.1 billion in assets. “The slowdown in industrial output may force the central bank to pause on rates, which could act as a positive and bring some relief for the markets.”

The Reserve Bank of India meets on July 26 to set policy after raising rates 10 times since March last year to rein in prices, joining countries including China and South Korea in battling accelerating living costs. The country’s inflation rate quickened to 9.06 percent in May from 8.66 percent in April. The government releases June price figures tomorrow, as well as food-cost data for the week ended July 2.
Factory Output

Industrial production growth unexpectedly slowed in May, the government said yesterday. Output at factories, utilities and mines rose 5.6 percent from a year earlier, the least since August 2010, following a revised 5.8 percent gain in April, The median of 27 estimates in a Bloomberg News survey was for an 8.5 percent jump.

The S&P CNX Nifty Index rose 0.8 percent to 5,568.25 and its July futures traded at 5,572.35. The BSE 200 Index added 0.8 percent to 2,299.29.

DLF increased 1.6 percent to 224.2 rupees, paring this year’s drop to 23 percent. Mahindra & Mahindra gained 1.4 percent to 712.85 rupees.

Overseas funds purchased a net 4.74 billion rupees ($107 million) of Indian stocks on July 11, raising total investment in equities this year to 95.7 billion rupees, according to data on the website of the Securities and Exchange Board of India.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
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