Bloomberg/Mumbai

Indian stocks surged the most in five weeks as engineering companies and property developers rallied after a government survey called for “big-bang” reforms in Prime Minister Narendra Modi’s first full-year budget today.
Tata Power Co, the largest private generator, and Larsen & Toubro, the biggest engineering company, surged about 5% each after their venture won a defence project. A gauge of engineering companies rallied to a seven-year high. Unitech surged 17%, sending an index of real-estate shares to a six-month high.
The S&P BSE Sensex added 1.7% to 29,220.12, erasing the month’s loss. Asia’s third-biggest economy could expand as much as 8.5% after a forecast increase of 7.4% in the year ending this March, a team of Finance Ministry advisers wrote in a report today. India has reached “a sweet spot” and policy measures by the nine-month-old government could cumulate into “big bang” reforms.
“The economic survey has given a hint that we can expect a good budget,” R K Gupta, managing director of Taurus Asset Management Co, which has about $660mn in assets, said by phone from New Delhi.
Finance Minister Arun Jaitley will use the survey’s data when he presents his budget. Foreigners have bought a net $3.9bn of domestic shares this year, the highest among eight Asian markets tracked by Bloomberg after Taiwan, amid optimism that Jaitley will announce measures to bolster growth, increase spending on infrastructure while paring subsidies. Lower energy prices have increased the scope to ease one of Asia’s highest interest rates and reduce a subsidy bill that makes up about 15% of total expenditure. Consumer price inflation will be between 5% and 5.5% in the year starting April 1, below the central bank’s 6% target, the report predicts. Tata Power surged 5.6%, the best performer on the Sensex. Larsen jumped 4.8% and Bharat Heavy Electricals increased 2.4%. The S&P BSE Capital Goods Index surged 3.8% to its highest level since January 2008.
ICICI Bank, the biggest non-state-run lender, jumped 4.3%. The gain was the most in six weeks and came after six straight days of declines. State Bank of India surged 3.6% and HDFC Bank added 1.5%. Foreigners bought a net $403.1mn of local shares on Thursday. The Sensex trades at 16.4 times projected 12-month profits, versus the MSCI Emerging Markets Index’s multiple of 11.9, data compiled by Bloomberg show.
Meanwhile the rupee edged down to 61.84/85 per dollar versus the previous close of 61.75/76 on dollar purchase by state-run banks likely for RBI offsetting debt-related inflows from foreign banks, dealers said.
The benchmark 10-year bond yield down 1 basis point at 7.73%, ahead of the federal budget due today.