India best performing equity market in Asia-Pacific for 2014

The BSE Sensex rose more than 1 per cent on Friday to become the best performing equity market in Asia-Pacific for 2014 in dollar terms, on continued hopes the incoming Narendra Modi government would unveil substantial economic reforms.

Gains were also helped as State Bank of India surged after reporting bad loans fell in January-March, sparking a rally in other state-run lenders.

Modi will be sworn in on Monday, ushering in the new Bharatiya Janata Party government, and investors will first focus on his cabinet appointments, especially the finance ministry portfolio. The administration would then need to unveil a new budget by early July.

Still, not all analysts are as optimistic. Deutsche Bank downgraded Indian stocks to "neutral" from "neutral/overweight" relative to other global emerging markets, saying valuations, appeared "very stretched."

"Earning multiples look a little stretched for short term. July budget would be the next check point for this rally," said Alok Roongta, chief financial officer at Bharti AXA Life Insurance.

The BSE Sensex rose 1.3 per cent, or 318.95 points, to end at a record closing high of 24,693.35, although the index is still around 3 percentage points away from the all-time high hit last week.

This brings the BSE's gain so far for the year in dollar terms to 23.71 per cent in 2014, compared to the next best performer, Indonesia's IDX Composite .JKSE which gained 22.7 per cent.

The Sensex rose 2.4 per cent for the week, marking its third consecutive weekly gain.

The broader Nifty rose 1.25 per cent, or 90.70 points, to end at 7,367.10, posting a weekly gain of 2.3 per cent.

SBI surged 9.6 per cent, after earlier hitting its highest since May 2011. The state-run lender said net non-performing loans as a percentage of total assets fell to 2.57 per cent in the March quarter from 3.24 per cent in the preceding quarter.

SBI's share gain was its biggest single-day advance since Sept. 5, 2013.

The results at SBI sparked gains in other state-run banks, with Punjab National Bank rising 5.4 per cent.

Also, hopes of reforms in the power sector by the new government continued to drive shares in the sector.

NTPC Ltd rose 3.9 per cent and Tata Power Co TTPW.NS gained 6.4 per cent.

Ashok Leyland surged 13.7 per cent after the company's January-March operating profit of Rs. 184 crore beat some analyst estimates.

Reliance Communications rose 4.2 per cent after reports said that the company was in talks with China's Citic Telecom over an undersea cable joint venture, citing unnamed people familiar with the talks.

Among decliners, Motherson Sumi Systems fell 1.5 per cent adding to Thursday's slump of 2.3 per cent after operating margins at its European unit Samvardhana Motherson B.V. lagged some analysts estimates in the January-March quarter.

ITC, India's largest cigarette maker, ended 0.8 per cent lower despite January-March earnings beating estimates as traders continued to move out of defensives to domestic cyclicals.