India’s benchmark stock index rose as some investors judged the gauge’s worst monthly performance since January as excessive even as the country’s economy grew last quarter at the slowest pace in more than two years.
Reliance Industries Ltd. (RIL), the country’s largest company, rose 1.7 percent, reversing a loss of as much as 1.6 percent. Tata Consultancy Services Ltd. (TCS), the largest software maker, gained 2 percent, erasing a decline of as much as 1.1 percent.
The BSE India Sensitive Index (SENSEX), or Sensex, rose 0.7 percent to 16,123.46 at the 3.30 p.m. close in Mumbai. It pared a loss of as much as 1 percent after data showed economic growth of 6.9 percent last quarter, the smallest gain since 2009, matched the median of 24 estimates in a Bloomberg survey. The Sensex has lost 9.4 percent this month, and its 30 members trade at 14 times estimated profits, near the lowest in 2 1/2 years, data compiled by Bloomberg show.
“There was some bottom-fishing and smart buying as some stocks are at attractive valuations,” Chokkalingam G, chief investment officer at Centrum Broking Pvt., said by phone from Mumbai. “The GDP number was a relief to those who were very pessimistic.” One of the 24 analyst in the Bloomberg poll had estimated economic growth of 5.6 percent.
The Reserve Bank of India, which last month cut its growth forecast to 7.6 percent from 8 percent, has been constrained in supporting the economy as it struggles with inflation that’s almost twice the rate in China and higher than in Brazil and Russia. The central bank has lifted rates 13 times since March 2010, and its next policy review is due Dec. 16.
China cut the amount of cash that banks must set aside as reserves for the first time since 2008 as Europe’s debt crisis dims the outlook for exports and expansion. Reserve ratios will drop 50 basis points effective Dec. 5, the People’s Bank of China said in a statement on its website today.
China’s move, which came after markets closed in Mumbai, may have “a demonstrative effect” on the Reserve Bank, said Centrum’s Chokkalingam.
The Sensex has lost a fifth of its value this year, the third-worst performer among major Asian benchmark indexes, on concern a weak rupee, rising funding costs and Europe’s crisis will combine to hurt profits. The rupee has slid 14.4 percent against the dollar this year, Asia’s worst performer, reaching an all-time low of 52.73 on Nov. 23. The loss in the currency has raised the cost of repaying foreign debt and raw materials.
Profits for the 30 Sensex companies may grow 11 percent to 12 percent in the year to March 2013, less than the 17 percent forecast by analysts, according to Tata Asset Management Ltd. Forty percent of Sensex firms reported earnings that missed estimates in the September quarter, on top of a 47 percent lag in the three months ended June, according to Bloomberg data.
“The rupee’s slide will contribute as much as 45 percent to 50 percent to the decline in profits of companies” on the S&P CNX Nifty Index of the National Stock Exchange of India Ltd. in the next two quarters,’’ said T.S. Harihar, co-head of institutional derivatives at ICICI Securities Ltd.
Foreign funds this year reduced holdings of the nation’s stocks by $851 million as of Nov. 28, fueling the slide in the rupee, exchange data show. The currency completed its biggest monthly loss in almost two decades, falling 0.4 percent today to 52.21 per dollar in Mumbai.
The Nifty Index added 0.6 percent to 4,832.05. The BSE 200 Index increased 0.3 percent.
Reliance Industries climbed 1.7 percent to 778.25 rupees. Tata Consultancy rose 2 percent to 1,115.55 rupees. HDFC Bank Ltd. (HDFCB), the second largest private lender, rose 1.7 percent to 442.5 rupees. Tata Motors Ltd. (TTMT), biggest truckmaker and owner of Jaguar Land Rover, fell 2.6 percent to 172.8 rupees, extending yesterday’s 2.4 percent slide.
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