Indian Stocks Gain for Second Day as Inflation Eases; SBI Leads

Indian stocks rallied for a second day amid expectation slowing inflation may prompt the central bank to lower borrowing costs to boost economic growth.

State Bank of India, the nation’s largest lender, rallied to its highest since August. Tata Motors Ltd. (TTMT), the biggest truckmaker and owner of Jaguar Land Rover, jumped 5.6 percent after its quarterly profit beat estimates.

The BSE India Sensitive Index (SENSEX), or Sensex, rose 0.7 percent to 17,888.67, according to preliminary closing prices at 3:30 p.m. in Mumbai. Inflation eased to the lowest level in more than two years in January, government data showed today. The Reserve Bank of India last month pared banks’ reserves ratio and signaled cuts in interest rates to stoke growth forecast by the government to be the weakest this year since 2009.

“The RBI surprised us by reducing reserve ratios and that is probably the biggest easing story, relative to expectations, we’ve seen in emerging markets this year,” said Adrian Mowat, the Hong Kong-based chief Asia and emerging-market strategist at JPMorgan Chase & Co. “Indian inflation will move lower.”

Reserve Bank Deputy Governor Subir Gokarn said Feb. 2 the authority will reduce rates once it’s confident inflation will keep slowing. Benchmark wholesale-price index rose 6.55 percent from a year earlier, the government said today, compared with 7.47 percent in December. The median estimate of 25 economists in a Bloomberg News survey was for a 6.7 percent jump. Policy makers cut the amount banks must set aside as reserves for the first time since 2009, joining nations from Brazil to Thailand that have begun monetary easing.

India’s $1.7 trillion economy, Asia’s third biggest, will expand 6.9 percent in the year ending in March, the least since 2009, the government said Feb. 7. Gross domestic product grew 8.4 percent in 2010-2011. The next policy review is on March 15.

Foreign funds have still purchased a net $4.1 billion of Indian stocks since Jan. 1, after pulling out $512 million in 2011, contributing to the 15 percent jump in the Sensex. The gauge sank 25 percent last year, its second-worst annual loss. Emerging stock funds got $5.8 billion in the week ended Feb. 8, the most since October 2010, Citigroup Inc. said last week, as policy makers from Brazil to the Philippines cut funding costs.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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