Indian stocks had the year’s best rally as global equities advanced ahead of a European Central Bank meeting today to decide on interest rates, and as recent declines lured investors.
State Bank of India, the nation’s biggest lender, paced gains among its peers. Tata Motors Ltd. (TTMT), the largest truckmaker and owner of Jaguar Land Rover, jumped the most in about four months. The BSE India Sensitive Index (SENSEX) soared 2.7 percent to 16,454.3 at close, matching the gauge’s advance on Jan. 3.
While most economists predict the ECB will keep interest rates on hold, 12 of the 44 surveyed by Bloomberg forecast a cut. UTI Asset Management Co., the country’s best-performing debt-fund manager, expects the Reserve Bank of India to cut its key interest rate by 25 basis points at its review on June 18 after Deputy Governor Subir Gokarn signaled slowing growth and lower oil prices increased scope for easing. India’s economy grew 5.3 percent in the March quarter from a year earlier, the least in nine years.
The RBI cut rates on April 17 for the first time in three years, after raising it a record 13 times from mid-March 2010 to October 2011 to cool consumer prices. Inflation averaged 7.1 percent in the first four months of this year, compared with 9.5 percent in the whole of 2011. Crude-oil prices in New York have fallen 14 percent this year.
Offshore investors withdrew a net $103 million from local shares on June 4, reducing their investment in Indian equities this year to $8.3 billion, according to the market regulator.
Foreigners reduced holdings by $273 million in May. Still, investments into local equities are at record levels, according to data compiled by Bloomberg.
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