Indian (SENSEX) stocks advanced, paring the weekly decline, led by lenders and carmakers.
The S&P BSE Sensex index climbed 0.4 percent to 18,939.07 at 11:26 a.m. in Mumbai, paring the weekly loss to 2 percent. The 30-stock gauge fell 5.2 percent last month, the sharpest monthly drop since May. Larsen & Toubro Ltd. (LT), India’s largest engineering company, increased 1.5 percent. ICICI Bank Ltd. (ICICIBC) and mortgage lender Housing Development Finance Corp. (HDFC) climbed more than 1.5 percent each. Maruti Suzuki India Ltd. (MSIL), the nation’s biggest carmaker, rallied 2.8 percent.
India targets a shortfall of 4.8 percent of gross domestic product in the year starting April 1, and achieved 5.2 percent in 2012-2013, Finance Minister Palaniappan Chidambaram said in his budget speech yesterday. A report yesterday showed GDP rose 4.5 percent in the December quarter from a year earlier, the weakest pace in almost four years. That increased bets that the central bank may cut borrowing costs at its meeting this month.
“The Reserve Bank of India is probably happy with the fiscal consolidation the minister delivered in the budget and we will see some rate cuts sooner than later,” John Praveen, chief investment strategist at U.S.-based Prudential Financial Inc., which has $1.06 trillion in assets, said in an interview in Mumbai. Prudential operates through Pramerica Mutual Fund in India. “We will see a cut this month of at least 25 basis points. I won’t be surprised if it’s 50 basis points.”
After the first interest-rate reduction in nine months in January, Reserve Bank Governor Duvvuri Subbarao said Feb. 16 he will weigh the quality of the government’s fiscal adjustment, adding “there is room for monetary easing, but that room is limited.” The next policy review is on March 19.
Larsen & Toubro added 1.5 percent to 1,388.75 rupees. ICICI Bank rose 1.9 percent to 1,059.85 rupees and Housing Development Finance climbed 1.7 percent to 770.35 rupees.
Maruti Suzuki India surged 2.8 percent to 1,392.05 rupees. Tata Motors Ltd. (TTMT), the owner of Jaguar Land Rover, increased 1 percent to 290.5 rupees.
The Sensex index trades at 13.4 times projected 12-month profits, compared with 10.3 times for the MSCI Emerging Markets Index, data compiled by Bloomberg show. Volumes on the Sensex were 24 percent more than the 30-day average at this time of the day. The CNX Nifty (NIFTY) Index of the National Stock Exchange of India Ltd. increased 0.4 percent to 5,716.82.
The Sensex has declined 5.8 percent from a two-year high reached on Jan. 25 as profits from State Bank of India to Tata Motors Ltd. missed estimates and as local mutual funds saw net outflows for the eighth month in January, data from the industry trade body show. Profits at 43 percent of the Sensex companies trailed estimates in the three months through Dec. 31, compared with 40 percent in the previous two quarters, data compiled by Bloomberg show.
Overseas funds bought $157 million of local stocks on Feb. 27, extending this year’s purchases to a net $8.48 billion, data compiled by Bloomberg show. They bought $24.5 billion of stock last year, the most among 10 Asian markets tracked by Bloomberg, excluding China.
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