India’s Stocks Rise, Post Biggest Annual Advance in 18 Years
By Rajhkumar K Shaaw
Dec. 31 (Bloomberg) -- India’s stocks posted their biggest annual gain in 18 years, led by NTPC Ltd. after the Economic Times reported the government may relax a rule to allow power producers to sell at market prices.
NTPC, the nation’s biggest power utility, surged to a two- year high. Economic Times reported that NTPC and other energy suppliers may get approval to sell about 10 percent of their power at market-determined prices, boosting profits. Larsen & Toubro Ltd., the largest engineering company, climbed after it won an order.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, gained 120.99, or 0.7 percent, to 17,464.81. The gauge has risen 81 percent this year, sparked by a rally after the election victory of Prime Minister Manmohan Singh’s ruling coalition in May, on expectations he will introduce measures to boost growth.
“The government is serious about reforms,” said Kishor Ostwal, managing director of CNI Research (India) Ltd. in Mumbai. “The spectacular gains this year has been due to the market-friendly policies of the Manmohan Singh government.”
The Sensex has more than tripled in the past decade, compared with a 4.5 percent drop in the MSCI Asia Pacific Index. The S&P CNX Nifty Index on the National Stock Exchange rose 0.6 percent to 5,201.05. The BSE 200 Index increased 0.5 percent to 2,180.25. The markets will be closed tomorrow for a holiday.
The National Stock Exchange and rival Bombay Stock Exchange, Asia’s oldest, plan to start trading 55 minutes earlier at 9 a.m. from Jan. 4.
Economic Growth
Singh said on Dec. 27 he expects the economy to grow at least 7 percent in the year ending March 31 after the $1.2 trillion Indian economy expanded 7.9 percent in the three months ended Sept. 30, the quickest pace in six quarters. The growth lagged behind only China among the world’s major economies.
Growth in India is benefiting from record-low interest rates, tax cuts and higher government spending unveiled by policy makers since September 2008 to shield the economy from the global slump. The combined stimulus is worth more than 12 percent of GDP.
“The trend in corporate earnings and economic growth is likely to continue in the new year,” said A.N. Sridhar, a fund manager at Sahara Asset Management Co. in Mumbai. “The only concern among investors is how the government is able to tackle inflation.”
NTPC added 1.1 percent to 235.65 rupees, the highest since Jan. 18, 2008. About 85 percent of the output from power producers such as NTPC is currently sold to state government utilities on long-term contracts.
NTPC
The government may allow NTPC to sell a part of the remaining power to bulk buyers such as sugar mills and steel factories, the Economic Times report said. Power Secretary H. S. Brahma declined to comment when contacted on his mobile phone.
“If the government allows NTPC to sell more merchant power, incrementally it will be good for the stock,” said Madanagopal Ramu, an analyst at Centrum Broking in Mumbai, who plans to revise his rating of the company to “hold” from “sell.” “NTPC is like a retirement fund, you have to hold it as part of a defense strategy as it’s an apt protection in a downside.”
Larsen & Toubro added 0.9 percent to 1,677.6 rupees after it won orders worth 5.81 billion rupees ($124 million) from Powergen Infrastructure LLC and Bangalore city. Sical Logistics Ltd. surged 9.6 percent to 74.85 rupees after an order worth 1.63 billion rupees from state-run Hindustan Copper Ltd.
Automakers
A strengthening economy is boosting Indian demand for products such as cars, plasma screens and refrigerators. The nation’s passenger car sales leapt 61 percent in November, the most in more than five years, on rising demand for Maruti Suzuki India Ltd. hatchbacks and Tata Motors Ltd.’s Nano, the world’s cheapest car.
Tata Motors, the largest truckmaker and owner of Jaguar Land Rover Ltd., was the best-performer on the Sensex this year after its shares jumped fivefold. Mahindra & Mahindra Ltd., the largest maker of sport-utility vehicles and tractors, followed with a fourfold gain, while Maruti tripled.
Increasing demand for cars increased demand for metals. Sterlite Industries (India) Ltd., the No. 1 copper and zinc producer, and Hindalco Industries Ltd., the biggest aluminum producer, and Tata Steel Ltd., the biggest producer of the alloy, tripled in the past year.
Overseas funds bought a net 3.85 billion rupees of Indian equities on Dec. 29, taking their investments in stocks this year to 830.7 billion rupees, the nation’s market regulator said yesterday. Purchases by global investors have reached $17.4 billion this year, poised to surpass the record $17.65 billion of net inflow into stocks in 2007.
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