India’s Nifty Index Futures Gain Before Monetary Policy Review

Indian stock-index futures gained, signaling benchmark indexes may rise for a fourth day, before the Reserve Bank of India meets today to review monetary policy.

SGX CNX Nifty Index futures for May delivery rose 0.2 percent to 6,017 at 9:56 a.m. in Singapore. The underlying CNX Nifty (NIFTY) Index advanced 1.2 percent to 5,999.35 yesterday, the highest level since Jan. 31. The S&P BSE Sensex index added 1.2 percent to 19,735.77. The Bank of New York Mellon India ADR Index of U.S.-traded shares climbed 1.5 percent.

Central bank Governor Duvvuri Subbarao will cut borrowing costs today for a third straight meeting, reducing the benchmark repurchase rate to 7.25 percent from 7.50 percent, according to 33 of 40 analysts in a Bloomberg survey. Asian stocks rose today after U.S. jobless claims reached a five-year low and the European Central Bank cut its benchmark interest rate to a record low.

“The rally so far has been driven by a larger-than- estimated rate cut hope and better-than-expected corporate earnings,” Kishor Ostwal, managing director of CNI Research (India) Ltd., said by phone yesterday. “Now the ball is in the central bank’s court. Central banks globally are in a generous mood to pump in liquidity; it remains to be seen if the RBI joins them to boost growth.”

Record Deficit

Profit at just two of the 12 Sensex companies that have reported March-quarter results has trailed analyst estimates. Net income at about 43 percent of the 30 index firms trailed forecasts in the three months ended Dec. 31, compared with 40 percent in the previous two quarters.

The Sensex climbed the most since November last month as slowing inflation and a drop in gold and oil prices stoked speculation the RBI will cut borrowing costs today.

Still, the central bank signaled yesterday that elevated consumer-price inflation and a record current-account deficit is constraining scope for monetary policy to support economic growth.

India’s economy expanded at the weakest pace in a decade in the fiscal year ended March 31 and consumer inflation held above 10 percent, even as wholesale-price growth slowed in March to the lowest rate in more than three years.

“Monetary policy would need to be calibrated recognizing the very limited policy space available to ease further,” the Reserve Bank said yesterday in an economic review before today’s rate decision in Mumbai. It cited “significant” risks including a “high” current-account gap and “inflation above the threshold over which it becomes inimical to growth sustainability.”

The Sensex has climbed 1.6 percent this year and trades at 13.3 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s 10.4 times. The Indian (SENSEX) measure’s 50-day volatility, a measure of price swings, climbed to a nine-month high yesterday.

Foreign funds bought a net $183 million of local shares on April 30, taking their net investment in equities this year to $11.3 billion, data compiled by Bloomberg show. Inflows last year totaled $24.5 billion, the most among 10 Asian markets tracked by Bloomberg, the data show.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

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

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