Indian stocks climbed for the first time in four days after the central bank indicated it has more room to lower borrowing costs following a slowdown in economic growth and a drop in oil prices.
Larsen & Toubro Ltd., the nation’s biggest engineering company, and Oil & Natural Gas Corp., the largest explorer, rose more than 3 percent each. Tata Motors Ltd., the biggest truckmaker, ended four days of losses. The BSE India Sensitive Index added 0.2 percent to 15,988.4 at close.
Indian manufacturing slowed in May, according to a private survey on June 1, after government data the previous day showed economic growth slowed to a nine-year low in the March quarter. The Sensex has fallen 13 percent from its Feb. 21 peak and the rupee sank 6 percent last month in Asia’s worst performance as foreign funds turned net sellers for a second month in May.
“I won’t be surprised if the Reserve Bank of India cuts rates by Friday evening,” Chokkalingam G, chief investment officer at Centrum Broking Pvt. in Mumbai, told Bloomberg UTV today. “The government is in a desperate mood to bring back dollars. They will take more steps to promote foreign investment out of compulsion.”
India’s economy has been hurt by political gridlock that has deterred investment, elevated consumer prices and slowing exports, with gross domestic product growth moderating to a near-decade low in the March quarter. Brent, the benchmark India uses, has slid 23 percent this quarter, paring costs for a nation that imports 80 percent of its oil.
The factors “that are suggesting more room are growth somewhat lower than expectations, that may have a positive impact on core inflation,” and a drop in oil prices, RBI Deputy Governor Subir Gokarn said in Mumbai, reiterating a position he signaled three days ago.
Benchmark bonds advanced for a third day, pushing yields to the lowest level since April, on speculation the RBI will cut rates this month to support growth.
The Sensex has advanced 3.5 percent this year. The gauge trades at 12.5 times estimated earnings, the lowest level in more than three years, according to data compiled by Bloomberg. That compares with a multiple of 9.7 times for the MSCI Emerging Markets Index.
“Valuations are most attractive than they have been for almost a decade if we keep aside the three months period around the Lehman Brothers crisis,” Saurabh Mukherjea, director of institutional equities at Ambit Capital in Mumbai, said in an interview with Bloomberg UTV. “People are getting depressed about India and we feel many of the causes of the depression are misguided. We are advising our clients to buy high-quality names in this selldown.”
India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index, fell 4.4 percent to 25.60. The Nifty added 0.1 percent to 4,848.15. About 751 million shares traded on the BSE and NSE on June 1, 17 percent less than the 12-month daily average.
Larsen & Toubro jumped 3.4 percent to 1173.5 rupees, ending a four-day, 5.8 percent slide. Oil & Natural Gas added 3.2 percent to 254.05 rupees. Tata Steel Ltd., the biggest producer, gained 1.5 percent to 404 rupees.
DLF Ltd., the biggest developer, climbed 1.9 percent to 186 rupees, rebounding from an intra-day drop of as much as 7.2 percent. State Bank of India, the nation’s largest lender, advanced 0.9 percent to 2,045.85 rupees. ICICI Bank Ltd., the second-biggest lender, also rose 0.9 percent to 788.85 rupees. HDFC Bank Ltd., the third-biggest lender, climbed 1.1 percent to 495.65 rupees.
Tata Motors increased 1.9 percent to 228.85 rupees, ending a four-day, 19 percent plunge. The stock is still the best performer on the Sensex this year. Reliance Industries Ltd., owner of the world’s largest oil-refining complex, gained 1.1 percent to 692.75 rupees, rebounding from a three-year low.
Overseas investors sold a net $112.5 million of domestic stocks on May 31, reducing their investment this year to $8.5 billion, according to the nation’s market regulator.