Indian (SENSEX) stocks rallied to a two-year high, erasing a weekly loss, as carmakers and lenders increased ahead of the central bank policy meeting next week.
The BSE India Sensitive Index, or Sensex, rose 0.9 percent to 20,103.53 at the close. The gauge climbed 0.3 percent this week. Maruti Suzuki India Ltd. (MSIL), the biggest carmaker, surged to a three-year high after third-quarter profit exceeded analysts’ estimates. Tata Motors Ltd. (TTMT), the owner of Jaguar Land Rover, jumped 2.6 percent, ending a five day, 11-percent drop. State Bank of India Ltd., the nation’s biggest lender, increased 2.2 percent, the most since Dec. 14.
Prime Minister Manmohan Singh’s administration took a step yesterday to spur inflows and avert a debt-rating downgrade by increasing a limit on foreign investment in rupee bonds by $10 billion to $75 billion. The Reserve Bank of India will cut the benchmark rate by 25 basis points to 7.75 percent on Jan. 29, according to 15 of 18 analysts surveyed by Bloomberg. Two analysts forecast a 50 basis-point cut.
“We would be happy if the central bank is slow in cutting interest rates as India is still prone to inflationary risks,” Gary Dugan, chief investment officer for Asia and Middle East at Royal Bank of Scotland Group Plc’s wealth management unit, told Bloomberg TV India today. “We would be comfortable” with a 25 basis point rate cut by the RBI next week.
Consumer-price inflation accelerated to 10.56 percent in December, the second-highest level among the Group of 20 major economies, data compiled by Bloomberg show. Core inflation eased to 4.19 percent from 4.49 percent in November, according to calculations by Bloomberg. The RBI has left its benchmark rate at 8 percent since a 50 basis-point cut in April 2012.
Tata Motors, the best performer on the Sensex last year, increased 2.6 percent to 301 rupees. Mahindra & Mahindra Ltd. (MM), India’s largest maker of sport-utility vehicles, gained 2.8 percent to 901.5 rupees.
Maruti Suzuki soared 3.9 percent to 1,599.45 rupees, the highest level since Dec. 14, 2009. Third-quarter net income at Suzuki Motor Corp. (7269)’s Indian unit more than doubled to 5.01 billion rupees ($93 million), beating the 4.89 billion-rupee median of 38 analysts’ estimates compiled by Bloomberg.
Only two out of 13, or 15 percent, of Sensex members that have reported December-quarter earnings have missed forecasts, compared with 40 percent in the previous two quarters, data compiled by Bloomberg show.
The Sensex has advanced 3.5 percent this year, extending last year’s 26 percent jump, as government efforts to open up more industries to overseas investment and cut fuel subsidies lured foreign funds. The gauge trades at 16.9 times reported earnings, the most expensive since July 2011.
Finance Minister Palaniappan Chidambaram is on a tour of Asia and Europe to woo investors. He pledged to deepen a policy overhaul that lured foreigners to invest $24.5 billion into domestic shares last year, the most among the 10 Asian markets tracked by Bloomberg, excluding China. The inflows helped fuel the biggest annual increase in the Sensex since 2009.
“It’s not always simple to invest in India and get the full support of government policies,” RBS’s Dugan said. “At the moment the policies are in the right direction, and for a foreign investor look very attractive.”
Dugan said he expects the 50-stock S&P CNX Nifty Index (NIFTY) on the National Stock Exchange of India Ltd. to rally to a record 6,600 by December this year. The Nifty jumped 0.9 percent to 6,074.65 at the close.
The India VIX index, which gauges the cost of protection against losses in the Nifty, added 2.1 percent to 14.77. Volumes on the Sensex exceeded the 30-day average by 13 percent.
Overseas funds were net buyers of local stocks for an 19th straight day on Jan. 23, purchasing a net $151.5 million, data from the regulator show. They have bought a net $3.01 billion of stocks this year, a record for the period, the data show.
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