April 18 (Bloomberg) -- Indian stocks advanced after the International Monetary Fund boosted its forecast for the global economy and a Spanish bond sale eased concerns the debt crisis may be worsening in Europe, India’s biggest trading partner.
Tata Motors Ltd., which owns Jaguar Land Rover, extended gains from a record. HDFC Bank Ltd. climbed to its highest-ever price after profit jumped 30 percent. The MSCI Emerging Markets Index gained the most in almost a week after the IMF raised its global growth forecast to 3.5 percent from 3.3 percent, and Spain sold more debt than targeted.
The BSE India Sensitive Index, or Sensex, rose 0.2 percent to 17,392.39 at close. The gauge pared an intraday advance of 1 percent after the central bank Governor Duvvuri Subbarao, who pared a key interest rate yesterday by a greater-than-forecast half a percentage point to revive growth, reiterated that the chance of a further cut in borrowing costs is small.
“The ball is now in the government’s court and it needs to respond by cutting the fiscal deficit,” said Arun Khurana, a fund manager at UTI Asset Management Co., which manages $11 billion in Mumbai. “A 50-basis point cut is not enough to jump-start economic growth. More needs to be done.”
Asia’s third-biggest economy expanded at the slowest pace in three years in the fourth quarter after the RBI raised rates a record 13 times between March 2010 and October last year and a political gridlock deterred investment. Inflation slowed less than estimated in March to 6.89 percent, a pace that is still the fastest among the biggest emerging economies.
“There is scope for more action provided the growth is more optimistic and inflation is more subdued than we currently expect,” Subbarao told Bloomberg UTV in Mumbai today. “The probability of a rate hike and the probability of a further rate cut are non-zero but small.”
The Sensex has risen 13 percent this year as foreign funds bought a net $8.9 billion of domestic shares, a record for the period, on optimism the central bank will ease monetary policy. The gauge trades at 13.6 times future earnings, compared with the MSCI Emerging Markets Index’s 10.4 times.
“RBI’s more than expected 50 basis points rate cut will not be good enough to kick-start the sagging investment cycle in India as the room for more sharp cuts appears to be limited with sticky inflation,” CLSA Asia Pacific Markets analysts led by Mahesh Nandurkar wrote in an report today. The brokerage cut its Sensex target to 19,000 from 20,000.
India VIX, which measures the cost of protection against declines in the S&P CNX Nifty Index, slid 1.4 percent to 20.03 at close. It fell to an eight-month low intraday. The Nifty added 0.2 percent to 5,300 and its April futures settled at 5,322.70. The BSE 200 Index rose 0.3 percent.
A total 875 million shares changed hands on the BSE and NSE yesterday, equivalent to the daily average in the past year, according to data compiled by Bloomberg.
Sterlite Industries (India) Ltd., the largest copper and zinc producer, increased 0.8 percent to 109.3 rupees. Hindalco Industries Ltd., the aluminum maker that controls U.S.-based Novelis Inc., surged 2.2 percent to 130.75 rupees. Tata Steel Ltd., the biggest producer, gained 0.8 percent to 465.2 rupees.
Tata Motors added 2.8 percent to 309.75 rupees, extending this year’s rally to 74 percent, the most among Sensex stocks. HDFC Bank gained 1.4 percent to 537.65 rupees.
Wipro, the third-biggest software exporter, climbed 1.5 percent to 427.4 rupees. Tata Consultancy Services Ltd. rose 0.6 percent to 1,097.55 rupees.
Overseas investors bought a net 3.91 billion rupees ($76 million) of shares yesterday, taking their investment this year to 442.8 billion rupees, according to the market regulator.
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