Indian Stocks Hold Near Two-Year High Before Monetary Policy

India’s (SENSEX) benchmark stock index held near a two-year high before the central bank’s monetary policy review tomorrow.

The BSE India Sensitive Index, or Sensex, closed little changed at 20,103.35, with volumes on the gauge lagging behind the 30-day average by 16 percent. The index ended last week at 20,103.53, the highest level since Jan. 6, 2011. Tata Motors Ltd. (TTMT), the owner of Jaguar Land Rover, climbed 2.5 percent while state-run explorer Oil & Natural Gas Corp. dropped 1.8 percent.

The Reserve Bank of India will probably cut the benchmark rate by 25 basis points to 7.75 percent tomorrow, according to 25 of 29 analysts surveyed by Bloomberg. The central bank last reduced the rate by half a percentage point in April, and has resisted calls from Finance Minister Palaniappan Chidambaram for further reductions to bolster an economy growing at the slowest pace in a decade, citing high inflation.

“It feels like the night before Christmas for the markets as investors wonder whether or not they’ll get a Santa visit,” said Shankar Char, vice-president at ICICI Securities Ltd. in Mumbai. “While the bigger picture remains a bit cloudy, foreign funds continue to pour money into Indian stocks.”

The government’s economic-policy overhaul may boost room to focus on spurring growth, the RBI said in a report released after market closed. Still, the authority signaling the scope for easing is limited by risks such as elevated prices. While gains in the benchmark wholesale-price index slowed to a three- year low of 7.18 percent last month, inflation has stayed above the RBI’s comfort level of 5 percent the past three years.

Auto Stocks

Tata Motors climbed 2.5 percent to 308.55 rupees, and motorcycle maker Hero MotoCorp Ltd. (HMCL) jumped 1.9 percent to 1,798.35 rupees, its biggest jump since Dec. 12. ONGC dropped 1.8 percent to 334.95 rupees after closing on Jan. 25 at its highest level in more than two years.

Maruti added 0.5 percent to 1,608.15 rupees, the highest since Dec. 14, 2009. The stock rallied 3.9 percent on Jan. 25 as third-quarter profit at the unit of Suzuki Motor Corp. (7269) more than doubled to 5.01 billion rupees, beating the 4.89 billion-rupee median analyst estimate in a Bloomberg survey.

Two out of 13, or 15 percent, of Sensex-listed stocks that have reported December-quarter earnings have trailed forecasts, compared with 40 percent in the previous two quarters, data compiled by Bloomberg show.

The Sensex has advanced 3.5 percent this year, extending last year’s 26 percent jump, as government efforts to open up more industries to overseas investment and cut fuel subsidies helped lure foreigners. Overseas funds have bought a net $3.01 billion of shares this year through Jan. 23, according to the regulator, surpassing the previous January record of $2.18 billion set last year.

Record Flows

Inflows surged to $24.5 billion in 2012, the highest among 10 Asian markets tracked by Bloomberg, excluding China, helping the Sensex to post its biggest annual gain in three years. The gauge trades at 15.9 times estimated earnings, compared with a multiple of 10.9 times for the MSCI Emerging Markets Index. (MXEF)

Reliance Industries Ltd. (RIL), operator of the world’s largest refining complex, retreated 1.6 percent to 897.55 rupees, its steepest decline since Oct. 8. The company’s KG-D6 and NEC-25 fields are among 14 oil and gas blocks that have been declared “no-go” areas by India’s defense ministry, barring any exploration or production activity, the Press Trust of India reported, citing people it didn’t identify.

The S&P CNX Nifty Index (NIFTY) on the National Stock Exchange of India was little changed at 6,074.80 while its January futures traded at 6,078.15. India VIX, which gauges the cost of protection against losses in the Nifty, gained for a third day, rising 2.7 percent to 15.17, data compiled by Bloomberg show.

To contact the reporter on this story: 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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