March 31, 2017 10:19 pm JST

Modi win, global cues drive Indian shares' best quarter in three years

MUMBAI (NewsRise) -- Indian shares posted their best quarter in nearly three years, as foreign investors stepped up buying on bets of more economic reforms after the Narendra Modi-led Bharatiya Janata Party swept elections in the nation's most populous state.

A global equity rally sparked by U.S. President Donald Trump's pledge to introduce tax reforms and boost public spending coupled with the Federal Reserve's decision not to signal a faster pace of rate increases also boosted sentiment. Upbeat December quarter earnings at home also helped.

The benchmark BSE Sensex index declined 0.1% or 26.92 points, to 29,620.50 Friday, while the broader NSE Nifty 50 index ended unchanged at 9,173.75. For the quarter ending Mar. 31, the indices jumped 11.2% and 12.1%, respectively, their best three-month gains since the month after Modi won national elections in 2014.

The ruling BJP's decisive victory in Uttar Pradesh state elections is seen as a sign Modi will return for a second five-year term at India's helm in 2019 and also boosts his chances to barrel through reform agenda.

In February, New Delhi defied expectations and said the nation's economy grew at a better-than-expected 7% during the October-December quarter, despite a mammoth cash recall imposed in November, also cheering investors.

Favorable state election results, lower-than-expected demonetization impact on activity and earnings and tailwinds from global reflation trade have all helped fuel risk appetite, Goldman Sachs said in a research note.

"We expect quality growth stocks to do well near-term and remain overweight on India as the medium-term reform story remains promising," the brokerage said. The house expects the Nifty index to reach 9,500 in 12 months and 10,200 by the end of 2018 as earnings recovery gathers pace.

Overseas investors have purchased a net $4.69 billion in local stocks so far this month, the highest monthly inflows into Indian equity markets ever, as per data collated by the National Securities Depository Ltd.

On Friday, sixteen of the 30 Sensex constituents ended lower, while overall advancing issues beat declining ones 1,617 to 1,132 and 224 stocks were unchanged.

For the quarter, Reliance Industries and banks were among the top gainers, while most pharmaceutical companies declined.

Reliance Industries - India's biggest private company by sales - jumped over 22% during the quarter after several brokerages upgraded price targets on the stock after an earlier-than-expected monetization of its telecom business. The stock gained 3.9% to 1,319.20 rupees Friday to touch a nine-year high on expectations its telecom venture Reliance Jio will see a massive jump in subscriber base when it releases latest user data, due "soon," dealers said.

Financial stocks have been outperformers lately amid hopes of consolidation within the sector and on expectations the government is close to announcing measures to tackle increasing bad debts. Banks' asset quality has come under the spotlight after the Reserve Bank of India ordered for an asset quality review the year before last, forcing banking entities to recognize bad loans and provide for them.

Still, India lenders' gross non-performing assets ratio at end of Sept. 2016 stood at 9.1% of advances, higher than 7.8% as of Mar. 2016, RBI data showed.

HDFC Bank-India's biggest lender by market value gained 19.7%, while State Bank of India jumped 17.3% during the quarter. Index heavyweight and mortgage lender Housing Development Finance Corp. advanced nearly 19%.

Among other key gainers, engineering and construction major Larsen & Toubro added 16.7%, while cigarette maker ITC finished 16% higher during the quarter.

Most drugmakers lost value during the January-March quarter amid slowing approvals in the U.S. and regulatory issues. Dr. Reddy's Laboratories slumped 13.9% after the U.S. Food and Drug Administration flagged concerns over manufacturing practices at a facility in southern India. Smaller peer Lupin declined 2.6%.

Friday, state-run Indian Oil Corp. advanced 3.4% to 386.75 rupees as the stock was included in the Nifty 50 index.

--Dhanya Ann Thoppil

Asia300

Reliance Industries Ltd.

India

Market(Ticker): BOM(500325)
Sector:
Industry:
Energy Minerals
Oil Refining/Marketing
Market cap(USD): 79,272.74M
Shares: 3,251.90M
Asia300

State Bank of India

India

Market(Ticker): BOM(500112)
Sector:
Industry:
Finance
Regional Banks
Market cap(USD): 36,893.79M
Shares: 8,632.05M
Asia300

Housing Development Finance Corp. Ltd.

India

Market(Ticker): BOM(500010)
Sector:
Industry:
Finance
Finance/Rental/Leasing
Market cap(USD): 43,474.25M
Shares: 1,593.26M
Asia300

Larsen & Toubro Ltd.

India

Market(Ticker): BOM(500510)
Sector:
Industry:
Industrial Services
Engineering & Construction
Market cap(USD): 24,443.00M
Shares: 1,400.54M
Asia300

ITC Ltd.

India

Market(Ticker): BOM(500875)
Sector:
Industry:
Consumer Non-Durables
Tobacco
Market cap(USD): 53,740.13M
Shares: 12,176.01M
Asia300

Dr. Reddy's Laboratories Ltd.

India

Market(Ticker): BOM(500124)
Sector:
Industry:
Health Technology
Pharmaceuticals: Generic
Market cap(USD): 5,130.11M
Shares: 165.75M
Asia300

Lupin Ltd.

India

Market(Ticker): BOM(500257)
Sector:
Industry:
Health Technology
Pharmaceuticals: Generic
Market cap(USD): 6,651.40M
Shares: 451.74M
Asia300

Indian Oil Corp. Ltd.

India

Market(Ticker): BOM(530965)
Sector:
Industry:
Energy Minerals
Oil Refining/Marketing
Market cap(USD): 32,032.59M
Shares: 4,855.90M

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