Indian Stocks Rally as Monetary Easing Speculation Lifts Miners

Indian (SENSEX) stocks advanced the most in three weeks as the central bank hinted at monetary easing next month even after it kept interest rates unchanged for a fifth straight meeting.

The BSE India Sensitive Index, or Sensex, rose 0.6 percent to 19,359.77, according to preliminary closing prices. Volumes in the 30-stock measure exceeded the 30-day average by 47 percent, according to data compiled by Bloomberg. Aluminum producer Hindalco Industries Ltd. (HNDL) led peers higher. Tata Motors Ltd. (TTMT) climbed 1.3 percent. Bharti Airtel Ltd. and Bharat Heavy Electricals Ltd. (BHEL) soared more than 4 percent each.

Reserve Bank of India Governor Duvvuri Subbarao kept the repurchase rate at 8 percent and held the cash reserve ratio for lenders at 4.25 percent after a cut in October. Slowing growth and Prime Minister Manmohan Singh’s policy overhaul to revive growth may prompt the governor to respond to “threats to growth from this point onwards,” the central bank said.

“I don’t think it’s a lost opportunity and come January, we will see some action from the RBI,” Gautam Trivedi, head of equities at Religare Capital Markets Ltd., said by telephone. Trivedi said he plans to add more stocks that may benefit from lower borrowing costs, including carmakers.

Subbarao has so far withstood calls from Finance Minister Palaniappan Chidambaram for lower rates to bolster an economy forecast by the government yesterday to expand at the slowest pace in a decade this fiscal year ending in March. The central bank’s next policy review is scheduled on Jan. 29.

The Sensex has risen 25 percent this year, headed for its biggest annual jump since 2009, as government policy steps to open the nation’s economy to overseas investment lured foreign funds. The 30-stock gauge is valued at 15.3 times estimated earnings, compared with the MSCI Emerging Markets Index’s 12 times, data compiled by Bloomberg show.

To contact the reporters on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net; Shikhar Balwani in Mumbai at sbalwani@bloomberg.net

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

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