Sensex advances to 2-week high, paced by bank shares

Indian stocks climbed before the release of monthly inflation and industrial output data as optimism grew over the progress of economic Bills in Parliament.

ICICI Bank Ltd, State Bank of India, and HDFC Bank Ltd rose at least one per cent each. Dr Reddy's Laboratories Ltd was the top gainer on the S&P BSE Sensex. Asian Paints Ltd jumped to a record after its group sales beat analyst estimates Wednesday. Tata Consultancy Services Ltd. added 1.9 per cent.

The Sensex index increased 0.8 per cent to the highest since April 27. Industrial production may have expanded 2.5 per cent from a year earlier in March, compared with a two per cent gain in February, a Bloomberg survey of economists showed before government data due Thursday. Parliament passed a Bill on Wednesday to overhaul archaic insolvency laws, taking prime minister Narendra Modi a step closer to fulfilling his pledge to make it easier to do business in the world's fastest-growing major economy.

"Quarterly earnings are signalling an uptick in industrial demand," Jitendra Panda, chief executive at Peerless Securities Ltd, said by phone from Kolkata. "Bank stocks are up after the bankruptcy legislation was passed by Parliament. Investors are finding value in beaten down drugmakers and utilities."

The Bill's passage gives Modi a political victory after opponents blocked several other pieces of legislation, including a national sales tax. It's also one of the biggest steps in India's battle to clean up $117 billion of stressed assets. The inability to shut loss-making companies and collect dues had locked up funds at banks and damped lending and investment.

Consumer prices may have risen 5.05 per cent from a year earlier in April, from 4.83 per cent in March, a Bloomberg survey showed.

Earnings are also recovering after the worst run since the global financial crisis. Eight of 15 Sensex firms that have posted March-quarter results have beaten or matched estimates.

Dr Reddy's reported group net income of Rs 74.6 crore after accounting for a Rs 431-crore charge related to its Venezuela operations. That compares with the Rs 560-crore estimate of 20 analysts in a Bloomberg News survey.

Foreign investors bought $58 million of local stocks on May 10, taking this year's inflows to $1.8 billion. They invested $585 million last month after an inflow of $4.1 billion in March, which was the highest in three years.

The Sensex has lost 1.3 percent this year and trades at 15.9 times 12-month projected earnings versus 11.4 for the MSCI Emerging Markets Index.

“IIP numbers are a tad disappointing, especially the manufacturing part. Capital goods sector has shown sharp de-growth.the market will take the numbers in stride and not worry excessively.”

Ajay Bodke
CEO, Portfolio Management Services, Prabhudas Lilladher

 

“Increase in food inflation is where the market is going to see some kind of concern. However, as the monsoons are expected to be better than normal, the market should not take it too negatively. IIP has definitely been a negative surprise.”

Tirthankar Patnaik
India Strategist, Mizuho Bank