From Bloomberg:

Indian stocks climbed, halting a three-day decline, as overseas investors bought shares after valuations approached a two-year low and a drop in industrial output prompted speculation the central bank will pause after the longest stretch of rate increases in a decade.

Reliance Industries Ltd. (RIL), the most valuable company, rose to a one-week high. DLF Ltd. (DLFU), the biggest developer, advanced the most in more than a week on report HCL Group may buy a stake in its insurance venture. Mahindra & Mahindra Ltd. (MM), the largest producer of tractors, added 2.1 percent.

The Bombay Stock Exchange Sensitive Index, or Sensex, rose 184.40, or 1 percent, to 18,596.02 at the 3:30 p.m. close in Mumbai. The gauge dropped 3.5 percent in the three days through yesterday and traded at 14.9 times estimated profit, within 10 percent of the lowest level since May 9, 2009, Bloomberg data show. Foreign funds have been net buyers of domestic stocks for 13 sessions, the longest stretch in three months.

"The smart investor will not wait for the inflation and interest rate cycle to end; we're close to the peak," said Chokkalingam G, chief investment officer at Centrum Broking Pvt. in Mumbai. "India remains one of the most lucrative places to invest. Investors should use any fall to add to their holdings." He favors state-run banks, drugmakers and consumer goods, sugar mills, tiremakers and engineering companies.

The Reserve Bank of India officials will meet July 26 to set policy after raising rates 10 times since March last year to rein in prices, joining countries including China and South Korea in battling accelerating living costs. India's inflation quickened to 9.06 percent in May from 8.66 percent in April. Price data for June, as well as food-cost figures for the week ended July 2, are due for release tomorrow.

The S&P CNX Nifty Index rose 1.1 percent to 5,585.45 and its July futures settled at 5,608.25. The BSE 200 Index added 1.1 percent to 2,306.

DLF Venture
Reliance increased 2.1 percent to 865.45 rupees, its highest level since July 7.

DLF jumped 3 percent to 227.2 rupees, paring this year's decline to 22 percent after the Economic Times reported HCL Group may pay 4.5 billion rupees for a 74 percent stake in DLF's insurance venture DLF Pramerica Life Insurance Co. The report cited an unidentified person familiar with the deal.

Mahindra & Mahindra gained 2.1 percent to 718.3 rupees. Tata Consultancy Services Ltd. (TCS), the largest software services exporter, rose 0.3 percent to 1,149.05 rupees, paring an earlier gain of as much as 2 percent. The company will declare its earnings tomorrow. Profit in the three months ended June may climb 23 percent to 22.6 billion rupees, according to the median estimate of 19 analysts in a Bloomberg Survey.

Some 33 percent of the companies in the Sensex reported profits that missed analysts' estimates in the March quarter, compared with less than a quarter that did so last year.

Earnings Outlook
Nomura Holdings Inc. said 100 of the 114 companies under its coverage may post an average 4 percent gain in profit for the June quarter. Sales would increase 21.7 percent from a year ago, the brokerage said in a July 8 report.

Industrial production growth unexpectedly slowed in May, the government said yesterday. Output rose 5.6 percent from a year earlier, the least since August 2010, following a revised 5.8 percent gain in April, The median of 27 estimates in a Bloomberg News survey was for an 8.5 percent jump.

The Sensex has lost 9.3 percent of its value this year, the second-worst performer among key indexes in the world's 10 biggest markets, amid increases in borrowing costs. Companies on the measure are valued at 15 times estimated earnings, compared with 10.9 for the MSCI Emerging Markets Index.

India's rupee gained, ending a two-day decline, as global funds stepped up purchases of local shares to take advantage of growth in Asia's third-biggest economy.

Overseas funds purchased a net 4.74 billion rupees ($107 million) of Indian stocks on July 11, raising total investment in equities this year to 95.7 billion rupees, according to data on the website of the Securities and Exchange Board of India.

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.

More on India:

Move over China... This country's gold demand is EXPLODING

An unusual phenomenon that's placing a strong floor under gold

"Alarm zone": Inflation exploding in key Asian country