Indian stocks advanced for a fourth day, extending the benchmark gauge’s biggest annual increase in five years.

Axis Bank Ltd. (AXSB), this year’s best performing stock on the S&P BSE Sensex (SENSEX), rose to a record. Tata Power Co., the biggest decliner of 2014, climbed for a third day. Maruti Suzuki India Ltd. (MSIL) pared its annual gain to 89 percent after the government said it won’t extend tax breaks to local automakers.

The Sensex added 0.2 percent to 27,448.51 at 11:58 a.m. in Mumbai. It’s risen 30 percent in 2014, the most among the world’s 20 biggest markets after China, after foreigners bought $ 16 billion of local stocks on expectations of faster economic growth. A further extension of the rally in 2015 may hinge on the ability of Prime Minister Narendra Modi’s government to push through reforms after opposition lawmakers stalled parliament proceedings and delayed passage of some legislation.

“The bumper returns that stock markets in India had in 2014 can easily be replicated in 2015, provided there is deliverance of reforms,” Ajay Bodke, head of investment strategy and advisory with Prabhudas Lilladher Pvt., said in an interview on Bloomberg TV India today.

The Sensex’s rally in 2014 came even as it lost 4.3 percent in December, its worst monthly decline since February 2013. Equity investors have pared expectations for a revival in Asia’s third-largest economy as opposition politicians hamper the prime minister’s ability to push through measures designed to attract foreign capital. The monthly drop reduced the gauge’s increase this quarter to 3.2 percent.

The 50-stock CNX Nifty Index (NIFTY) added 0.2 percent to 8,266.50, taking its rally in 2014 to 31 percent. Trading volumes in the Nifty were 47 percent lower than the 30-day average for the time of day.

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Axis Bank added 0.9 percent, taking this year’s gain to 94 percent, the most since 2009. ICICI Bank Ltd. (ICICIBC), India’s biggest private lender, climbed 0.8 percent. Tata Power, the biggest non-state power electricity generator, narrowed its 2014 loss to 6.9 percent.

Maruti Suzuki fell 0.5 percent, while Mahindra & Mahindra Ltd. (MM), India’s largest maker of sport-utility vehicles and tractors, decreased 1.6 percent. Finance Minister Arun Jaitley has decided against extending a tax break benefiting the local automobile industry in a bid to narrow the government’s budget deficit, a ministry official told reporters in New Delhi, asking not to be identified citing rules.

International investors sold a net $ 34.3 million of local shares on Dec. 29, paring this year’s inflows to $ 16 billion, the most in Asia after Japan. Indian stocks and bonds may attract about $ 18 billion to $ 20 billion in 2015 amid waning risk appetite, according to Credit Suisse Group AG, versus this year’s inflows of $ 42 billion.

The Sensex is valued at 15.1 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s multiple of 11.1.

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 Phani Varahabhotla