Most Indian stocks advanced before a central bank report on Asia’s third-largest economy today and an interest-rate decision tomorrow.
The BSE India Sensitive Index, or Sensex, rose less than 0.1 percent to 18,635.82 at the close. Sixteen shares climbed and 14 fell on the 30-stock gauge, which changed directions at least 12 times. Reliance Industries Ltd., owner of the world’s largest refining complex, climbed the most in a week. Bharat Heavy Electricals Ltd., the biggest power-equipment producer, plunged the most in nine months after reporting net income that trailed estimates.
India’s central bank will leave interest rates unchanged at 8 percent, 16 of 28 economists said in a Bloomberg survey. Eleven expect a second cut this year, to 7.75 percent, and one to 7.5 percent. Finance Minister Palaniappan Chidambaram has called for lower borrowing costs to back an economic-policy revamp that includes fuel-subsidy curbs to narrow a budget gap, steps to spur investment and efforts to bolster the rupee.
“The eventual direction of interest rates is down, so whether they do it in this meeting or in the next is not very important,” Ridham Desai, managing director and head of India research at Morgan Stanley, said in an interview to Bloomberg TV India today. “What’s more important is that the liquidity in the market doesn’t get squeezed.”
The Reserve Bank of India may cut banks’ reserve ratio by 25 basis points to 4.25 percent, according to 18 of 28 analysts in another Bloomberg survey. Two expect a reduction of 50 basis points and the rest no change.
Governor Duvvuri Subbarao, facing accelerating inflation of almost 8 percent as well as the slowest stretch of economic growth since the global recession in 2009, has lowered lenders’ reserve norms three times this year. India’s economy may expand close to 6 percent in the year that began April 1, less than an August estimate of 6.7 percent, Chakravarthy Rangarajan, chairman of Prime Minister Manmohan Singh’s Economic Advisory Council, said in an interview with Bloomberg TV India today.
Reliance Industries climbed 1.5 percent to 811.2 rupees. Wipro Ltd., the third-biggest software exporter, rallied 2.6 percent to 344.85 rupees, ending a seven-day decline.
Bharat Heavy sank 6.4 percent to 226.9 rupees, the most since Jan. 30. Second-quarter profit dropped 10 percent to 12.7 billion rupees, missing the 13.6 billion rupees estimated by 33 analysts in a Bloomberg survey.
Tata Motors Ltd., the owner of Jaguar Land Rover, fell 1.8 percent to 256.75 rupees. Hindustan Unilever Ltd., the biggest home-products maker, slid 1.1 percent to 546.05 rupees.
The Sensex has increased 21 percent this year, driven by overseas fund purchases and government policy reforms announced since mid-September to revive the economy. Foreign funds bought a net $18.2 billion of local shares this year, the most among 10 Asian markets tracked by Bloomberg, excluding China.
Earnings have trailed analyst forecasts at only three of the 16 Sensex firms that have posted results for the September quarter, compared with 40 percent in the three months through June, data compiled by Bloomberg show.
In comparison, some 59 percent of the companies on the MSCI Emerging Markets Index that reported earnings this month have missed analysts’ profit estimates, while 505 companies in China’s Shanghai Composite Index have reported third-quarter earnings with an average drop of 1 percent from a year earlier, according to data compiled by Bloomberg.
“India is looking like the better house in a bad neighborhood,” Morgan’s Desai said. “India is looking better now on relative basis and people at home may not appreciate that as much but if you are sitting outside India, you will appreciate it a lot more. Corporate fundamentals have not been as bad as in a lot of other places on earth and for sure policy momentum was not there but it’s probably coming back.”
The Sensex is valued at 14.9 times estimated earnings, compared with a multiple of 11.4 times for the MSCI Emerging Markets Index, data compiled by Bloomberg show.
The S&P CNX Nifty Index of 50 companies was little changed at 5,665.60 and its November futures settled at 5,702.10. The BSE-200 Index fell 0.1 percent and the BSE Mid-Cap Index lost 0.4 percent. The National Stock Exchange of India and the BSE Ltd. traded 841 million shares on Oct. 26, 8 percent less than the 12-month daily average.