Indian Consumer Shares Drop, Industrials Rise Before Data

India (SENSEX)’s stocks advanced for the first time in six days, led by industrial companies, after inflation unexpectedly eased in November.

The BSE India Sensitive Index, or Sensex, rose 0.3 percent to 19,292.93 at 11:59 a.m. in Mumbai, after losing 1.3 percent in the past five days. The S&P CNX Nifty Index gained 0.3 percent to 5,866.70. Larsen & Toubro Ltd. (LT), the nation’s biggest engineering company, increased the most in two weeks. ITC Ltd. (ITC), which owns hotels and manufactures cigarettes, sank 0.7 percent.

The Sensex swung between gains and losses at least 26 times before the Commerce Ministry reported the wholesale-price index climbed 7.2 percent in November. That’s lower than the previous month’s 7.45 percent and the median estimate in a Bloomberg News economist survey of 7.6 percent. The data comes before an interest-rate decision by the Reserve Bank of India on Dec. 18.

“Lower inflation increases the probability of a token rate cut by the RBI next week, which will help stocks rally,” Sunil Pachisia, vice president at Pratibhuti Viniyog Ltd., said in a phone interview from Mumbai. “However, investors are still cautious as there may be negative cues from the government or global markets which may result in a sudden sell off.”

Volumes on the 50-stock Nifty were 2.3 percent higher than the 30-day average at this time of the day, according to data compiled by Bloomberg. The 246-member BSE Mid-Cap Index (BSEMDCAP) rose 0.5 percent after sliding 1.2 percent yesterday.

Lower Volatility

The Sensex has climbed 25 percent this year, poised for its biggest annual advance since 2009, after Prime Minister Manmohan Singh opened the nation to more overseas investment in the past three months to revive growth and avert a downgrade of India’s credit rating. The stock gauge’s 100-day historical volatility dropped to 12 today, the lowest level in at least 10 years.

The Sensex has declined 0.7 percent this week, its first weekly loss in a month, after its valuation reached the highest level since February on Dec. 6. The Sensex trades at 16.2 times reported profit compared with a multiple of 12 for the MSCI Emerging Markets Index.

Larsen gained 1 percent to 1,642.3 rupees, the most since Nov. 29. ITC fell 0.7 percent to 293.3 rupees, after losing 3.5 percent yesterday.

Reliance Communications Ltd. (RCOM) climbed 1.4 percent to 75.7 rupees after India yesterday approved lower reserve prices for telecommunications spectrum. Chambal Fertilizers & Chemicals Ltd. (CHMB) rose 1.3 percent to 69.05 rupees after the federal cabinet yesterday approved a urea investment policy to boost output in the industry.

Flawed Orders

The government won parliamentary support last week on foreign investment in supermarkets. Cabinet approved yesterday changes to a law governing purchases of land for industry and highways, while Environment Minister Jayanthi Natarajan said the government has set up a panel to speed up approvals of infrastructure projects.

The stock regulator issued guidelines yesterday aimed at preventing flawed orders and uncontrolled trades after a brokerage mistake wiped 16 percent off the Nifty in October.

Any order for stocks, exchange-traded funds, index futures and equity futures exceeding 100 million rupees ($1.8 million) in value shouldn’t be accepted by stock exchanges for execution in the normal market, the Securities and Exchange Board of India said in a statement yesterday. The changes come after Emkay Global Financial Services Ltd. (EMKAY) entered 6.5 billion rupees of orders on behalf of an institutional client on Oct. 5, spurring a 16 percent plunge in the Nifty. The gauge rebounded to end the day 0.7 percent lower.

Overseas funds were net buyers of local stocks for a 20th straight day on Dec. 12, taking net purchases in 2012 to $22 billion, the most among 10 Asian markets tracked by Bloomberg, excluding China, data compiled by Bloomberg show.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

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

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