Indian Stocks Climb in U.S. Trading After Singh Wins Trust Vote

By Pooja Thakur and Anoop Agrawal

July 23 (Bloomberg) -- Indian stocks soared in U.S. trading after Prime Minister Manmohan Singh won a parliamentary vote on the survival of his government, fueling speculation he will revive reforms that had been blocked by communist former allies.

ICICI Bank Ltd., India's second biggest, rose 13 percent to $33.89 on the New York Stock Exchange, after Singh won a majority of votes in the nation's first confidence motion in a decade. The rupee, which has slumped 7.8 percent this year as overseas investors pared their holdings, may also advance today.

Singh's victory gives him the support needed to introduce reforms including giving overseas companies a bigger role in the financial industry. Stocks in India rallied to a one-month high yesterday on speculation Singh would win the vote, extending the tenure of a government that has delivered record economic growth.

``It is going to bring a lot of confidence to local as well as overseas investors,'' Parthasarthi Mukherjee, treasurer of Axis Bank Ltd. in Mumbai, said. ``Asset prices will rise as the negative element that was priced in will get reversed; reforms will be re-initiated and that process would be smoother and quicker this time.''

HDFC Bank Ltd., the third largest lender, jumped 9.8 percent. Infosys Technologies Ltd., the country's second-largest computer- services exporter, climbed 4.7 percent and smaller rival Wipro Ltd. advanced 5.5 percent.

Revived Bills

Bills to open pension management to overseas investors and remove a 10 percent cap on the voting rights of foreign investors in non-state banks may be revived. The government has also been seeking to raise the foreign investment ceiling for insurers to 49 percent, from 26 percent, since 2006.

The victory would also give the Singh administration more time to curb inflation stoked to a 13-year high by surging fuel and food prices before they begin a re-election bid. The central bank has raised borrowing costs to a 6 1/2-year high and asked banks to set aside more funds to curb price increases.

``Once this event is over, the focus will move back to oil, inflation and interest rates,'' said Ajay Bodke, who helps manage about $1 billion in Indian equities at IDFC Asset Management Co.

India's benchmark Sensitive Index has climbed 12 percent since July 16, its biggest four-day winning run since April 19, 2001. The stock market, Asia's fifth biggest, surpassed $1 trillion in value last year. It has jumped almost five-fold since May 2004, when the stock market lost a quarter of its value following the Congress Party's decision to join with groups that opposed plans to cut subsidies, sell state assets and fire workers, to form a majority government.

Trading was suspended twice on May 17, 2004, after the previous administration, which had said it would hasten the pace of asset sales, failed in its reelection bid. The Sensitive Index and the S&P CNX Nifty Index fell up to the exchange-imposed limits for the first time since the Bombay Stock Exchange was created in 1875 on that day.

Rupee Advanced

The rupee has advanced 6.5 percent against the dollar since the Congress Party proposed Manmohan Singh as its candidate for prime minister on May 18, 2004. The currency has gained in 10 of the 17 quarters after Singh took office, and risen in three of the five years through 2008.

The rupee has slumped 7.8 percent this year as a surge in oil prices increased import costs and overseas investors pared their holdings after inflation accelerated. The currency closed at 42.74 in Mumbai yesterday.

Benchmark bond yields touched a seven-year high this month after climbing every year since 2004 as economic growth that averaged almost 9 percent in the past four years, the fastest since independence in 1947, stoked demand and inflation.

The 10-year yield touched 9.55 percent on July 11, the highest since 2001, according to data compiled by Bloomberg.

The central bank has raised benchmark interest rates 11 times since October 2004 to curb accelerating inflation. The benchmark 10-year bond yield, which touched a seven-year high of 9.48 percent last week, closed at 9.12 percent yesterday.

To contact the reporter on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net; Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.