Mumbai: Indian stocks advanced amid optimism that the government may be able to push through its plan to allow foreign investment in the nation's retail industry after the parliament began debating the issue.
The BSE India Sensitive Index, or Sensex, rose 0.2 per cent to 19,348.12 at the close, holding at its highest level in 19 months set after jumping 4.5 per cent last week. Reliance Industries, the owner of the world's largest oil-refining complex, climbed 2.6 per cent, the most since September 17. Tata Power, the largest non-state generator, rallied 3.9 per cent.
The Sensex increased last week as data showing economic expansion slowed last quarter to match a three-year low stoked speculation the government will take more steps to boost growth and investment.
A deadlock ended after the government agreed last week to demands by the opposition for a vote on its decision to allow foreign firms to set up supermarkets.
"The stock markets will cheer it if there is a political consensus on reforms," Anita Gandhi, a director at Arihant Capital Markets in Mumbai, said by phone. "Investors will focus on the progress of this debate and the subsequent vote."
The debate in the lower house began at 2pm local time, while voting will take place today.
The Sensex swung between gains and losses at least 15 times before the debate began. The 30-stock gauge has climbed 25 per cent this year, driven by foreign flows and policy measures announced by the government since September. Overseas funds bought $145 million more stocks than they sold on December 3, taking net purchases in 2012 to $20.2 billion, the most among 10 Asian markets tracked by Bloomberg, excluding China, data shows.
Prime Minister Manmohan Singh began the biggest policy overhaul in a decade in mid-September, including fuel-subsidy curbs and a push to spur foreign investments to revive growth. Gross domestic product grew 5.3 per cent in the quarter ended on September 30 from a year ago, down from 5.5 per cent the previous quarter, government data showed last week.
Parliament has been repeatedly adjourned since reconvening on November 22 as opposition groups accused the government of reneging on its promise to win legislative support for the retail policy. Manmohan gave ground as allies and regional parties signaled they are unlikely to vote against the ruling bloc.
The government is "confident of numbers," Manmohan said on November 27 when asked if he'd be able to muster enough support to win the vote.
The retail policy, which state assemblies can refuse to implement, will enable companies including Wal-Mart Stores to step up their presence in the world's second-most populous nation.
Reliance Industries climbed 2.6 per cent to Rs824.70 after a report said the nation's Oil Ministry may approve the company's investment in satellite fields and R-series wells in the KG-D6 block.
The stock was rated equal-weight in new coverage at Barclays by equity analyst Somshankar Sinha, with a price estimate of Rs850 a share. Tata Power rallied 3.9 per cent to Rs111.65, the highest close in nine months. ONGC added 1.2 per cent to Rs265.25, a one-month high. The stock was rated equal-weight in new coverage at Barclays with a price estimate of Rs295 a share.
State Bank of India and ICICI Bank, the nation's top two lenders, advanced 1.6 per cent each. SBI rose to Rs2,239.55 and ICICI Bank increased to Rs1,119.35. Thirty-day volatility in the Sensex was at 11.01, compared to the year's lowest reading of 9.06 set on November 26, the data shows. The gauge trades at 15.8 times estimated earnings, the highest level since February. The MSCI Emerging Markets Index trades at a multiple of 11.7 times.
The S&P CNX Nifty Index on the National Stock Exchange of India added 0.3 per cent to 5,889.25, while its December futures settled at 5,923.65. India VIX, which measures the cost of protection against declines in the Nifty, jumped 1.9 per cent to 15.91. - Bloomberg News