Indian stocks advanced for a second day as speculation the U.S. Federal Reserve will take fresh stimulus measures countered signals from the nation’s central bank that it may sacrifice growth to control inflation.
Tata Motors Ltd. (TTMT), the owner of Jaguar Land Rover, rallied to a three-week high. Hindustan Unilever Ltd. (HUVR), the largest home products maker, climbed to a record. The BSE India Sensitive Index (SENSEX), or Sensex, rose 0.4 percent to 16,920.36, according to preliminary closing prices at 3:30 p.m. in Mumbai.
Signs of faltering growth mean the Fed will announce new steps to boost the economy, according to 12 of the 21 primary dealers who trade with the central bank, which is scheduled to release its statement on interest rates and the economy today. Indian inflation exceeds acceptable levels and restraining it may require sacrificing economic growth, central bank Governor Duvvuri Subbarao said yesterday.
“Monetary authorities globally are running out of ammunition and all we’ve become are liquidity junkies,” said Andrew Holland, chief executive officer of investment advisory at Ambit Capital Pvt. in Mumbai. “We need the next bit, and we’re waiting for one tonight from the Fed.”
Inflation growth of 7.5 percent is “above our tolerance level” and consumer-price inflation is “disturbing” at more than 10 percent, Subbarao said in a speech in Mumbai yesterday after markets closed.
The Reserve Bank of India unexpectedly left interest rates unchanged on June 18, citing elevated price pressures. Curbing the nation’s fiscal deficit and the success of the monsoon are among the keys to controlling prices, Subbarao said.
Offshore investors sold a net 5.93 billion rupees ($107 million) of shares on June 18, ending a eight-day, buying spree and reducing their investments in equities this year to 421.1 billion rupees, data from the regulator show. They cut holdings by $273 million in May, a second month of net sales.
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