Dec. 7 (Bloomberg) -- Indian stocks rose to a three-week high, tracking Asian equities, on optimism the Reserve Bank of India will ease monetary policy and on speculation Europe will step up efforts to fight its debt crisis.
Wipro Ltd., the nation’s third-biggest software services provider, surged to its highest in more than four months. State Bank of India, the country’s biggest lender, climbed for the fifth day. Sterlite Industries (India) Ltd., the largest copper producer, added 1.5 percent.
The BSE India Sensitive Index, or Sensex, rose 0.4 percent to 16,877.06, at the 3:30 p.m. close in Mumbai, the highest level since Nov. 15. The Sensex had its steepest rally since July 2009 last week on expectation the central bank may decide at its meeting on Dec. 16 to pause a record series of interest- rate increases as Asia’s third-largest economy slows.
“The market is waiting to see whether the central bank is able to loosen monetary policy decisively,” Hans Goetti, chief investment officer for Asia at Finaport Investment Intelligence, told Bloomberg UTV today. “The RBI may start to loosen its policy in the second quarter and there could be a buying opportunity ahead of the actual move.”
The Sensex has slumped 18 percent this year amid concern a weak rupee and rising funding costs will worsen the effects of Europe’s debt crisis on earnings. Companies in the gauge trade at 14.5 times estimated earnings, near the lowest level since May 2009. The MSCI Emerging Markets Index trades at 10.3 times.
Asian equities climbed on speculation European leaders meeting this week in Brussels will step up efforts to fight the debt crisis and stave off lower national credit ratings that may make funding bailouts more costly. The MSCI Asia Pacific Index rose 1.3 percent to 118.16.
The S&P CNX Nifty Index on the National Stock Exchange of India added 0.5 percent to 5,062.60. The BSE 200 Index climbed 0.3 percent to 2,038.47. Indian markets were closed yesterday for a holiday.
Wipro rallied 3.6 percent to 404.1 rupees, its highest level since July 26. Nearest rival Infosys Ltd. added 2.1 percent to 2,758.95 rupees.
State Bank of India climbed 1.8 percent to 1,945.4 rupees, extending its five-day rally to 11 percent. Sterlite added 1.5 percent to 109.55 rupees.
Shoppers Stop Ltd., the second-largest listed retailer, sank 4.9 percent to 349.65 rupees after the government suspended its decision to allow overseas companies like Wal-Mart Stores Inc. to open supermarkets after protests by opposition parties and its allies paralyzed parliament.
Prime Minister Manmohan Singh’s government will not seek to bring in the policy until it’s able to reach a consensus with all political parties, Pawan Kumar Bansal, parliamentary affairs minister, told reporters in New Delhi today.
Bharti Airtel Ltd., the biggest mobile-phone operator which has a venture with Wal-Mart Stores Inc., tumbled 3.4 percent to 377.35 rupees.
India’s economy grew 6.9 percent in the September quarter, the least since 2009, as demand cooled after the central bank raised borrowing costs 13 times since mid-March 2010 to limit inflation that’s exceeded 9 percent from December.
Credit Suisse Group AG has cut its earnings estimates for the Sensex companies by 7 percent to 1,300 rupees for the year to March 2013, Neelkanth Mishra, director of equity research, told reporters in Mumbai today. The brokerage’s target for the Sensex is 13,500 for the year ending in March 2013, he said. Earnings per share may drop to 1,200 rupees for the year, from 1,275 rupees now, as economic growth slows, and funding and labor costs climb, Bank of America Corp. said in a Dec. 5 note. The Sensex may decline to 14,500 in the next six months, according to the report.
Foreign Currency Bonds
The rupee slid 6.7 percent last month, the most in nearly two decades, increasing the cost of imported commodities and repayment costs for companies holding debt in foreign currency. A weakening rupee and the slump in the Sensex has exacerbated companies’ ability to pay $1.3 billion of foreign-currency convertible bonds due by March.
More than 80 percent of the maturing notes that can be exchanged for equity are 2012 debt issued in 2007, when the rupee averaged 41.30 per dollar, according to data compiled by Bloomberg. The currency averaged 50.86 last month, a drop of 23 percent since the notes were sold. Billionaire Anil Ambani’s Reliance Communications Ltd. has $925 million due in February, while Chennai-based Orchid Chemicals & Pharmaceuticals Ltd. needs to redeem $117 million that month.
Overseas investors sold a net $41.2 million of Indian stocks on Dec. 5, taking their withdrawals from equities this year to $7.4 million, according to data from the Securities & Exchange Board of India. They have cut their holdings by $2.45 billion from a record $104.4 billion in July.
--With assistance from Rajhkumar K Shaaw in Mumbai. Editor: Ravil Shirodkar
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