India Stock Futures Gain as Oil Eases Inflation Concern

Indian stocks climbed for the first time in five days as oil prices dropped, easing concerns rising energy costs will undermine efforts to curb inflation and lower interest rates.

Reliance Industries Ltd., operator of the world’s largest oil-refining complex, added 1.9 percent. Tata Motors Ltd., the largest truckmaker and owner of Jaguar Land Rover, rose for the first time in eight days. State Bank of India, the country’s biggest lender, gained the most in a month.

The BSE India Sensitive Index, or Sensex, advanced 1.6 percent to 17,731.12 at 3:30 p.m. in Mumbai, ending a four-day, 5.3 percent decline. Oil dropped for a second day today, losing as much as 0.6 percent to $107.84 a barrel, potentially cutting costs for companies in India, which imports three-quarters of its oil. Foreigner investors have poured $7 billion in local stocks this year, according to the market regulator.

“A high oil price would be a negative for India in the long term, but as long as it doesn’t exceed $130, it shouldn’t have too significant an impact on the budget deficit and inflation numbers,” Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management Ltd., which oversees $46 billion, said by phone today.

The RBI has signaled cuts in borrowing costs to shield the economy if inflation eases further. The interest-rate cycle has peaked, RBI Deputy Governor Subir Gokarn said on Feb. 14, after data showed consumer-price growth eased to a more than two-year low in January. The bank’s next policy review is on March 15.

‘Ill Afford’

“For every $10 increase in crude oil price, if it does get passed on to the consumer, one is talking about an 80 basis points increase in inflation,” Jal Irani, managing director at Macquarie Capital Securities (India) Pvt., said in an interview with Bloomberg UTV today. “The increase, if not passed, raises India’s subsidy bill by $7 billion to $8 billion a year. Given the significant deficit the government is running, higher oil price is something that one can ill afford.”

Demand for oil may weaken after London-traded Brent rose to a record high when priced in euros and pounds, according to Morgan Stanley. Brent, the benchmark for more than half the world’s crude, is also approaching a record in Indian rupees.

The Sensex has advanced 15 percent this year as overseas funds poured money into Indian shares after inflation slowed and the rupee rallied from a record low even as company profit growth slowed. The measure trades at 15.7 times future profits, compared with 19.4 times at end of 2010. The MSCI Emerging Markets Index trades at 10.7 times.

The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. gained 1.8 percent to 5,375.50. The BSE 200 Index soared 2.2 percent to 2,183.73.

BP Plan

Reliance climbed 1.9 percent to 796.5 rupees, snapping a two-day 6.9 percent fall. BP Plc said it’s developing a new plan with partner Reliance, operator of the country’s biggest natural gas deposit, to develop discoveries in the area simultaneously instead of in phases.

Tata Motors, the maker of the world’s cheapest car, the Nano, jumped 5.2 percent to 273.35 rupees, extending this year’s rally to 53 percent. State Bank rallied 5.1 percent to 2,231.25 rupees. ICICI Bank Ltd., the second-biggest lender, rose 2.6 percent to 910.8 rupees.

Profit growth of companies in the Sensex index fell to 4.3 percent in the final three months of 2011, trailing analysts’ estimates. The government predicted Feb. 7 that economic growth in the year ending March will probably slow to 6.9 percent, the weakest pace since 2009, from 8.4 percent a year earlier.

Overseas investors sold a net 5.43 billion rupees of Indian equities yesterday, paring their investments in equities this year to 347.1 billion rupees, according to the nation’s market regulator. That would be first net sales this month.

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