Indian stocks extended their longest weekly run in 16 months as the rupee strengthened and U.S. jobs grew more than estimated. Hindalco Industries Ltd. (HNDL), the aluminum maker that controls U.S.-based Novelis Inc., climbed 1.7 percent. State Bank of India, the biggest lender, advanced for a second day. Larsen & Toubro Ltd., the largest engineering company, rose 2.2 percent. The BSE India Sensitive Index (SENSEX), or Sensex, increased 0.6 percent to 17,707.31 as of the 3:30 p.m. close in Mumbai. The rupee had its longest winning run since October 2010 last week as the strongest manufacturing data in eight months prompted foreigners to buy a net $3.2 billion of local equities this year, compared with withdrawals of $512 million in 2011. “The one market we really like is India right now,� Bill Belchere, regional head of equity research at Mirae Asset Securities in Hong Kong, told Bloomberg Television in an interview today. “It’s coming back, and the second half is going to be quite a bit better than the first.� The S&P CNX Nifty (NIFTY) Index on the National Stock Exchange of India added 0.7 percent to 5,361.65, mirroring gains in Asian stocks. The MSCI Asia Pacific Index (MXAP) rose 0.4 percent, extending its longest stretch of weekly advances since 2010, as higher- than-expected U.S. jobs growth pushed up consumer companies. The Standard & Poor’s 500 Index reached a six-month high on Feb. 3 after data showed U.S. employers added 243,000 jobs in January, the most since April, fueling speculation the world’s biggest economy is recovering. ‘Surplus Liquidity’ The Sensex has rallied every week this year as the rupee jumped from a record low, the central bank pared banks’ reserve norms for the first time since 2009 and inflation eased. The index trades at 15.7 times future earnings, compared with 10.4 times on the MSCI Emerging Markets Index. “All asset classes -- emerging markets, developed markets equities, gold and crude -- have gone up dramatically,� said Sanjeev Prasad, senior executive director and co-head of Kotak Institutional Equities, in an interview to Bloomberg UTV today. “Globally we are seeing surplus liquidity conditions triggered by developments in the euro zone. The ECB is following a very loose monetary policy that has added to the loose policy being followed by the Fed. People are willing to take risks now.� Reserve Bank of India Deputy Governor Subir Gokarn said on Feb. 2 the central bank will reduce borrowing costs once it’s confident inflation will keep slowing. Policy makers reduced the amount lenders must set aside as reserves for the first time in three years, joining nations from Brazil to Thailand that have begun monetary easing. The RBI next meets on March 15. Manufacturing Growth Wholesale prices in December dropped below 8 percent for the first time in two years, after 13 interest-rate increases since the start of 2010. India and China posted an improvement in manufacturing numbers, suggesting the fastest-growing major economies are withstanding the impact of Europe’s debt crisis. Hindalco increased 1.7 percent to 155.3 rupees. Sterlite Industries (India) Ltd., the biggest copper and zinc producer, rose 2 percent to 125.35 rupees. State Bank surged 2.8 percent to 2,162.65, extending this year’s rally to 34 percent. Larsen & Toubro advanced 2.2 percent to 1,384.95 rupees. Hindustan Unilever Ltd. (HUVR), the unit of Unilever Plc, lost 3.6 percent to 387.05 rupees even as its third-quarter profit exceeded estimates. Net income was 7.54 billion rupees, beating the 6.96 billion rupees estimated by 31 analysts in a Bloomberg survey. The stock was the best performer on the Sensex last year with a 30 percent gain. Eight out of 17, or 47 percent, of Sensex companies have posted December-quarter earnings that missed analyst estimates, compared with 40 percent in the September quarter. Mid-Cap Discount The BSE Mid-Cap Index of 256 companies rallied 1.3 percent to 6,122.57, its highest level since Nov. 11. The gauge has jumped 19 percent this year, shrinking its discount over the Sensex to a four-year low. The ratio between the estimated price-to-earnings multiples for the Sensex and the mid-cap index narrowed to 1.16 times, the smallest reading since March 2008. It was 1.42 times at the end of last year, data compiled by Bloomberg show. “The interest-cost impact in a rising interest-rate cycle is more severe on mid-caps and that was one of the reasons for their underperformance last year,� said Jaya Rao Venkatesan, a fund manager in Chennai for Sundaram Mutual Fund, which manages about $3 billion in assets. “It’s a matter of time before the RBI cuts rates. That will augur well for mid-cap companies.� To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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