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Indian Stocks End Four-Day Retreat on Expiry, Stimulus Bets

Aug. 30 (Bloomberg) -- Indian equities rose for the first time in five days ahead of a report tomorrow on the nation’s economic growth and a speech by U.S. Federal Reserve Chairman.

The BSE India Sensitive Index, or Sensex, increased 0.3 percent to 17,541.64, rebounding from an intraday drop of 0.7 percent, as investors closed bearish bets following the expiry of derivative contracts. The gauge is poised for a 1.8 percent gain this month. Hindustan Unilever Ltd., the biggest home products maker, ITC Ltd., the largest cigarette company, and Tata Consultancy Services Ltd., the largest software exporter, all rallied to a record.

Data tomorrow may show Asia’s third-largest economy grew 5.2 percent in the quarter ended June, the slowest pace since the three months ended in March 2009, according to a Bloomberg survey. Investors are speculating Fed Chairman Ben. S. Bernanke will announce a third round of quantitative easing during a speech tomorrow in Jackson Hole, Wyoming. Indian futures and options contracts expire on the last Thursday of every month.

“Traders cut short positions on expiry amid expectation of local and global stimulus measures,” Aditya Agarwal, head of derivatives at Way2Wealth Brokers Pvt., said by telephone. “Fewer bearish bets were rolled over to the next series as Fed may announce quantitative easing.”

Rollovers in the 50-stock S&P CNX Nifty Index futures were at 56.3 percent at 4:25 p.m., compared with 70 percent in July, according to data compiled by Bloomberg.

India’s main opposition party stalled parliament for a seventh day, asking Prime Minister Manmohan Singh to exit after the chief auditor on Aug. 17 found the government may have lost $33 billion awarding coalfields without holding auctions.

‘Realistic Outlook’

“We need to see progress on reforms, liberalization of the economy and it would be nice to have some lower valuations that reflect a bit more on the realistic growth outlook,” Emil Wolter, head of Asian equities strategy at Macquarie Group Ltd. in Singapore, told Bloomberg TV India today.

The government was relying upon the current parliamentary session to end two years of policy gridlock to stoke economic growth from the slowest pace in three years.

Growth may weaken as inflation deters the Reserve Bank of India from reducing the highest borrowing costs in the region. Policy makers must cut inflation by about 2 percentage points, Governor Duvvuri Subbarao said on Aug. 27, signaling the bank has limited scope to cut rates at its Sept. 17 meeting.

Foreign Flows

The Sensex has still risen 14 percent this year, helped by the biggest overseas equity investments among 10 Asian markets tracked by Bloomberg. Foreign funds bought a net $74.5 million of equities yesterday, the 22nd day of purchases, taking their investments this year to $11.9 billion, data from the regulator show. That’s the longest stretch of net buying since a record 41-day streak through Oct. 27, 2010, Bloomberg data show.

The fund flow are “more short-term,” Macquarie’s Wolter said. “The longer term structural challenges are not getting smaller; they appear to be getting bigger. We need to see some clarity for the market to hold on to this amount of foreign investment.”

India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index, fell 0.4 percent to 16.67. The Nifty index rose 0.5 percent to 5,315.05 and its September futures settled at 5,339.15. The BSE-200 Index lost 0.4 percent to 2,135.46. India’s top two bourses traded 773 million shares yesterday, 13 percent less than the 12-month daily average.

Hindustan Unilever advanced 1.2 percent to 528.7 rupees. ITC added 0.5 percent to 270.6 rupees, its seventh day of gain. Tata Consultancy Services jumped 1.8 percent to 1,367.15, its highest level since the shares began trading on Aug. 26, 2004.

Tata Motors Ltd., owner of Jaguar Land Rover, increased 1.4 percent to 236.75 rupees, ending a three-day drop. Hindalco Industries Ltd., an aluminum maker, added 2.2 percent to 106.1 rupees, ending a four-day 8.2 percent slide.

Housing Development Finance Corp., the biggest mortgage lender, climbed 1.6 percent to 726.6 rupees. Lender HDFC Bank Ltd. added 1.3 percent to 595.9 rupees.

To contact the reporters on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net; Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

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

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