Most Indian stocks increased amid speculation the central bank will cut interest rates to revive economic growth even as inflation quickened to a 10-month high.
The BSE India Sensitive Index, or Sensex, rose 0.2 percent to 18,713.55 at the close. Three stocks gained for every two that fell on the 30-member gauge. Reliance Industries Ltd., the largest company by value, rose 0.5 percent before its earnings. Maruti Suzuki India Ltd., the biggest carmaker, declined the most in almost three months.
Interest rates need to come down to revive growth, Finance Minister Palaniappan Chidambaram told Bloomberg Television in Tokyo on Oct. 12, saying the reforms drive may create room for rate reductions. The wholesale-price index climbed 7.81 percent from a year ago after an increase in diesel prices and climbing 7.55 percent in August, official data showed today. The median of 35 estimates in a Bloomberg survey was 7.7 percent.
“Inflation was expected to remain high due to the impact of higher diesel prices,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd., said by phone from Kochi. “The central bank may still look to cut rates to revive growth given the statements we have seen.”
The Reserve Bank of India last month left rates unchanged for a third meeting to fight price increases and said reducing the budget deficit would help damp inflation. Its next policy review is on Oct. 30.
India’s economic growth may weaken to a decade-low this year and interest rates should remain unchanged until inflation eases, the International Monetary Fund said in a report on Oct. 9. Gross domestic product will rise 4.9 percent in 2012, less than a July forecast of 6.1 percent, the IMF said. Growth will quicken to 6 percent next year, helped by improving global markets and a boost to confidence from the recent policy revamp, the IMF said.
The Sensex last month had its biggest monthly gain since January as Prime Minister Manmohan Singh opened retailing and airlines to foreigners, pared fuel subsidies and reduced a tax on domestic companies’ overseas borrowings in a wave of policy making after two years of gridlock.
The stock gauge has risen 21 percent this year as offshore investors boosted their holdings of local shares. The measure is valued at 14.9 times estimated earnings, compared with a multiple of 11.4 times for the MSCI Emerging Markets Index.
“A time-bound correction could be on the cards and the upside is depleting because reforms have been announced and the market has gone up,” Mehraboon Jamshed Irani, principal and head of private client group at Nirmal Bang Securities Pvt. in Mumbai, told Bloomberg TV India today.
Reliance Industries, owner of the world’s largest refining complex, will report earnings for the September quarter today. Profit may decline to 53.7 billion rupees ($1 billion), from 57 billion rupees a year earlier, according to the median estimate of 28 analysts in a Bloomberg News survey. The stock added 0.5 percent to 823.05 rupees.
The earnings season started Oct. 12 with Infosys Ltd., the nation’s second-largest software exporter, paring its sales and earnings forecast. Earnings for 40 percent of the 30 Sensex companies missed estimates in the June quarter, compared with 30 percent in the three months ended March and 47 percent three months earlier, data compiled by Bloomberg.
Maruti lost 2.5 percent to 1,338.25 rupees, the most since July 23. Infosys shed 1.2 percent to 2,365.6 rupees. Hindalco Industries Ltd. rose 1.7 percent to 120.1 rupees.
The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. gained 0.2 percent to 5,687.25. Its October futures settled at 5,702.75. The BSE-200 Index added 0.1 percent while the BSE Mid-Cap Index rose less than 0.1 percent.
The National Stock Exchange of India and the BSE traded 1.1 billion shares on Oct. 12, 18 percent more than the 12-month daily average of 909 million.
Overseas funds bought $186 million more Indian stocks than they sold on Oct. 11, the 14th day of net purchases. This year they have bought $17.9 billion of local shares, data from the regulator show, the biggest inflow among 10 Asian markets tracked by Bloomberg, excluding China.