Indian stocks advanced to all-time highs amid speculation Narendra Modi will choose a cabinet capable of reviving economic growth.
Sun Pharmaceutical Industries Ltd. (SUNP) gained the most in a month after a local court removed the stay on the drugmaker’s $ 3.2 billion purchase of Ranbaxy Laboratories. Mahindra & Mahindra Ltd. (MM) and Coal India Ltd. (COAL) climbed to records. The rupee traded within 0.3 percent of an 11-month high.
The S&P BSE Sensex (SENSEX) rose 1.7 percent to a record 25,123.90 at 12:33 p.m. in Mumbai. The gauge has risen 12 percent in May, headed for its best monthly gain in five years. Modi yesterday signaled a smaller cabinet in comments posted on his Twitter Inc. account, with one member heading a cluster of ministries. Pakistani Prime Minister Nawaz Sharif will join heads of state or representatives from the South Asian Association for Regional Cooperation in attending the swearing in ceremony today.
“Modi has made the right start by inviting heads of neighboring nations and having a small cabinet,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd., said by telephone from Kerala. “The gesture can spur economic growth in the region. Investors are awaiting the final list of cabinet members.”
The Sensex has climbed 27 percent since Sept. 13, when the Bharatiya Janata Party named Modi as its candidate for prime minister. The rally pushed up the index’s 14-day relative-strength index to 84, the highest reading since 2007, data compiled by Bloomberg show.
Foreigners sold a net $ 19 million of local shares on May 22, paring this year’s inflows to $ 7.6 billion. That is still the highest among the eight Asian markets tracked by Bloomberg.
Autos Rally
Sun Pharmaceutical increased 1.8 percent, while Ranbaxy advanced 2.3 percent. Mahindra & Mahindra soared 4.9 percent, the most since Sept. 10. Tata Motors Ltd. (TTMT) jumped 3.2 percent, while carmaker Maruti Suzuki India Ltd. (MSIL) rose to a record. The S&P BSE Auto index climbed 3 percent to an all-time high.
Coal India surged 4.4 percent and Oil & Natural Gas Corp. (ONGC) rallied 4 percent to a record.
The Sensex is valued at 15.5 times its 12-month projected earnings, compared with a five-year average of 14.6 times. The MSCI Emerging Markets Index trades at a multiple of 10.8, data compiled by Bloomberg show.
The S&P BSE Mid-Cap Index added 1.5 percent, taking this month’s rally to 20 percent. The S&P BSE Small-Cap Index jumped 1.7 percent, taking the month’s advance to 24 percent.
Merging Ministries
Modi takes oath as prime minister today after a coalition led by the BJP won the strongest electoral mandate in 30 years. He may limit his council to about 50 ministers by merging departments, the Indian Express reported last week, citing no one. Road transport and highways and shipping and ports may be folded into the transport ministry, the report said.
“If we have a common transport ministry there are lot of things that can be done which are very good for the country,” S. Naren, chief investment officer with ICICI Prudential Asset Management Co., which manages $ 18.3 billion, told Bloomberg TV India in Mumbai today. “Decisions stuck between two ministries can be taken faster” if departments are merged, he said.
Arun Jaitley, 61, a former trade minister, is the frontrunner to become finance minister even though he failed to win a seat in the lower house of parliament, CNN-IBN news channel reported today.
Modi, the son of a tea seller, is favored by business leaders because of his record in Gujarat, which he’s led since 2001. The western Indian state has attracted investments from companies such as Reliance Industries (RIL) Ltd. and Ford Motor Co., while its per capita income nearly quadrupled during his tenure to 61,220 rupees ($ 1,040), faster than the national average.
To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net
To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Ravil Shirodkar, Phani Varahabhotla