Jan. 16 (Bloomberg) -- Indian stocks rose, erasing earlier losses, as Europe’s central bank bought bonds to ease concern about the region’s debt crisis.
Tata Motors Ltd., the biggest truckmaker and owner of Jaguar Land Rover, advanced 2.4 percent, reversing an earlier decline. Infosys Ltd., the second-largest software services provider that gets 22 percent of its sales from Europe, paced gains among its peers.
The BSE India Sensitive Index, or Sensex, rose 0.2 percent to 16,189.36 at the 3:30 p.m. close in Mumbai. The gauge lost 0.7 percent in intraday trading amid concern a decline in the nation’s inflation rate to a two-year low may not be enough for the central bank to cut borrowing costs. The Sensex plunged 25 percent in 2011 amid concern record interest-rate increases by the Reserve Bank of India will erode company earnings already threatened by Europe’s debt crisis.
“The markets danced to Europe’s tunes as the U.S. market is closed for holiday today,” said Arun Kejriwal, a director at Mumbai-based Kejriwal Research & Investment Services. “The fall in inflation is positive. A rate cut may still not happen. The central bank will hold rates and signal a dovish outlook” at its policy meeting next week, he said.
European bonds and the euro pared losses as the region’s central bank bought Italian and Spanish notes after Standard & Poor’s downgrade of nine members of the common currency. The European Union is India’s largest trading partner, according to the Asian nation’s trade ministry. India’s benchmark inflation rate declined to a two-year low.
India’s benchmark wholesale-price index rose 7.47 percent in December from a year earlier, the trade ministry said today, compared with a 9.11 percent gain in November. The median of 25 estimates in a Bloomberg survey was for a 7.40 percent gain. A rate of 4 percent to 6 percent is the “short term comfort range,” RBI Governor Duvvuri Subbarao said in September.
The RBI kept rates unchanged last month following a record 13 increases since March 2010 after the inflation rate slowed to 9.11 percent in November and the $1.7 trillion economy grew the least in at least two years in the September quarter.
“The bigger risk is growth rather than inflation, for the global economy as well as India,” Goldman Sachs Group Inc.’s economist Tushar Poddar said in an interview with Bloomberg UTV today. “Inflation is on a downward trajectory and I continue to see it going down in the next six months and monetary policy is significantly tight.”
The S&P CNX Nifty Index on the National Stock Exchange of India added 0.2 percent to 4,873.90. The BSE 200 Index rose 0.2 percent to 1,967.96.
Tata Motors, maker of the world’s cheapest car, the Nano, climbed 2.4 percent to 213.75 rupees. Maruti Suzuki India Ltd., the biggest carmaker, surged 3.2 percent to 1,008.05 rupees, its highest price since Nov. 14. The stock replaced Hindustan Unilever Ltd. in Kotak Institutional Equities’ top-10 list, the brokerage said today. Hindustan Unilever, the biggest household products maker, dropped 1.4 percent to 386.35 rupees.
Infosys added 2.2 percent to 2,640.15 rupees and larger rival Tata Consultancy Services Ltd. also rose 2.2 percent to 1,109.4 rupees. Wipro Ltd., the third-biggest, increased 1.6 percent to 407.45 rupees.
Foreign funds purchased a net 5.25 billion rupees ($102 million) of Indian stocks on Jan. 13, taking their investment in the equities this year to 24.7 billion rupees, data from the market regulator show. Overseas investors sold $512 million of equities last year, compared with a record inflow of $29.4 billion in 2010.
--With assistance from Santanu Chakraborty in Mumbai and Manish Modi in New Delhi. Editor: Ravil Shirodkar
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