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Equities

India shares advance for third day as Sun Pharmaceutical, fuel retailers gain

Better-than-expected earnings boost India's most valuable drug maker

MUMBAI (NewsRise) -- Indian shares rose for the third straight day on Monday, led by Sun Pharmaceutical Industries and fuel retailers.

The BSE Sensex advanced 0.7% to 35,165.48 and the Nifty 50 Index climbed 0.8% to 10,688.65. Sun Pharmaceutical jumped 7.1% to 499.70 rupees after reporting a better-than-expected 7% increase in net profit for the March quarter. CLSA upgraded India's most valuable drug maker to 'buy' and raised the stock's target price to 600 rupees, saying that earnings had bottomed out and adjusted earnings-per-share will nearly double over the next two years as monetisation of specialty pipeline begins.

Hindustan Petroleum, Bharat Petroleum, and Indian Oil jumped by at least 5.2% after Brent crude declined to near $75 per barrel, heading for a third day of losses. The fall in oil prices boosted aviation shares as well. InterGlobe Aviation added 2.4%, SpiceJet jumped 20%, its daily permissible limit, and Jet Airways advanced 7.7%.

The Sensex's climb to its highest level in almost two weeks came on the back of upbeat risk appetite following a fall in U.S. long-term bond yields. The U.S. 10-year borrowing cost fell to its lowest level in three weeks on Friday. Last week's Federal Reserve May meeting minutes, signalling the U.S. central bank's willingness to tolerate faster inflation, helped 10-year U.S. yields to cool off to 2.93%, almost 20 basis points lower from its recent highs.

Indian markets received another boost from the rise in the rupee to its highest level in two-weeks, prompting a four basis-points decline in local-long term bond yields.

Devang Mehta, head of Equity Advisory at Centrum Wealth Management, said that crude oil prices and the rupee-dollar equation are currently the major headwinds for the Indian economy, while robust trends in consumption growth from both rural and urban areas were the major positives. According to Mehta, the current year will be about "picking and holding high quality businesses exhibiting robust growth prospects & earnings profile."

India's March quarter GDP data is due on Thursday. Economists expect India's economic growth to climb to 7.5% in the period, up from 7.2% in the prior quarter. The May U.S. employment report is due on Friday.

Software exporters were the major losers on Monday after Tech Mahindra fell 3.9%. While the company reported a 30% sequential increase in net profit, it was helped by a tax benefit.

HCL Technologies declined 2.2%, Tata Consultancy Services dipped 2.4%, and Infosys dropped 1.2%.

Larsen & Toubro added 2.5% before the engineering conglomerate's March quarter earnings due later Monday.

Bank of Baroda advanced 3%. While the lender posted a loss for the March quarter, CLSA said it expects the bank to return to profitability from financial year 2019. Morgan Stanley said that it expects continued improvement in pre-provision operating profit.

Lakshmi Vilas Bank jumped 8.6% after The Economic Times reported that the lender was in talks with financial and strategic investors for selling up to a 26% equity stake to raise funds for expansion.

--Nimesh Vora

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