Indian stocks rebounded from their lowest level in a month as some investors judged the recent declines as excessive, and amid optimism a revival in monsoon rains will help policymakers’ efforts to revive growth.
Reliance Industries Ltd. (RIL), operator of the world’s largest oil-refining complex, rallied 2.2 percent after falling to the lowest level since Aug. 3 yesterday. State Bank of India, the largest lender, rose 1.3 percent, and ICICI Bank Ltd. (ICICIBC) advanced 1.1 percent. Tata Motors Ltd. (TTMT) rebounded from a three-week low.
The BSE India Sensitive Index (SENSEX), or Sensex, rose 0.3 percent to 17,440.87 at the close. Yesterday, the gauge ended at its lowest level since Aug. 3. A revival in the monsoon has helped narrow the deficit to 12 percent from 29 percent at the end of June, according to the weather office. Bigger harvests of rice, oilseeds and cereals will help cool the inflation rate that is the highest among the largest developing economies, potentially improving chances of the central bank reducing borrowing costs.
“The market had drifted in the past few days without any major negatives and that has provided investors an opportunity for value-picking,” said Sunil Pachisia, vice-president at brokerage Pratibhuti Viniyog Ltd. in Mumbai. “The monsoon has improved significantly, which should help bring down inflation and increase chances of a rate cut.”
Reserve Bank Governor Duvvuri Subbarao last reduced the benchmark repurchase rate in April after growth slowed for a fourth quarter. Borrowing costs have been kept unchanged at policy reviews in June and July on concern inadequate rainfall will fuel inflation.
Consumer prices rose 9.86 percent in July, faster than the 1.8 percent in China, 5.2 percent in Brazil and 5.6 percent in Russia, data compiled by Bloomberg show. India’s benchmark wholesale-price index rose 6.87 percent and has remained above the RBI’s 5 percent comfort level since December 2009.
India’s $1.8 trillion economy, Asia’s third largest, grew 5.5 percent in the June quarter from a year ago, a pace close to the three-year low of 5.3 percent in the first quarter. Manufacturing expanded at the slowest pace in nine months in August, a private survey showed yesterday.
The Sensex retreated 2 percent last week, its first weekly decline in five and the biggest since the week ended May 11. The gauge has still increased 13 percent this year as foreign funds have pumped in $12.3 billion into Indian stocks. Overseas investors sold a net $8.5 million of stocks yesterday, a second day of sales after 23 straight days of purchases, according to data from the market regulator.
The Sensex is valued at 13.9 times estimated earnings, compared with the MSCI Emerging Markets Index’s (MXEF) 10.8 times. Reliance Industries, owned by billionaire Mukesh Ambani, rallied 2.2 percent to 779.60 rupees, the most since Aug. 6. State Bank (SBIN) rose 1.3 percent to 1,875 rupees and ICICI Bank advanced 1.1 percent to 912.65 rupees.
Jindal Steel & Power Ltd. (JSP), the third-largest producer by market value, climbed 2.5 percent to 352.95 rupees, rebounding from more than a three-year low yesterday. Tata Motors, owner of British luxury car brands Jaguar and Land Rover, jumped 1.7 percent to 234.85 rupees.
India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index, sank 4 percent to 16.59. The Nifty added 0.4 percent to 5,274. Its September futures settled at 5,299.40. The BSE-200 Index (BSE200) rose 0.5 percent to 2,128.12. The top two bourses traded 635 million shares yesterday, compared with a 12-month daily average of 887 million shares.
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