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India’s Sensex Has Biggest Weekly Gain This Year on Rate Outlook

April 18 (Bloomberg) -- Indian stocks jumped, with the benchmark index completing its biggest weekly advance since December, as the narrowing of the trade deficit and falling commodity prices boosted the odds of a monetary-policy easing.

The S&P BSE Sensex rose 1.5 percent to 19,016.46, taking its gain this week to 4.2 percent, the most since the period ended Dec. 2. Volumes on the gauge were 13 percent below the 30-day average. The market is closed tomorrow for a holiday. ICICI Bank Ltd. paced gains among lenders. Bharti Airtel Ltd., India’s biggest wireless operator, rose to a one-month high. The Bank of New York Mellon index of Indian company American depositary receipts added 1.3 percent in U.S. trading.

India’s trade deficit in March shrank to $10.3 billion, a two-year low, government data showed today. The shortfall in the nation’s current account, the broadest measure of trade, along with elevated consumer prices, has limited the extent of rate cuts by the central bank. The authority may reduce the key rate by 25 basis points at its May 3 review, according to 14 of 16 economist in a Bloomberg News survey.

“Shares are rallying on speculation the Reserve Bank may cut the rates by as much as 50 basis points, and strong export numbers are hinting at a quicker growth revival,” B. Gopkumar, executive vice president at Kotak Securities Ltd. in Mumbai, said by telephone from Mumbai. “Inflation may fall faster due to the decline in oil and gold prices.”

Wholesale prices in India, which imports about 80 percent of its oil needs and is the world’s top bullion buyer, slowed to a 40-month low in March, data showed April 15. Brent slid below $100 a barrel this week for the first time since July and gold had its biggest slump in three decades. Imports of the two commodities added to a record $32.6 billion current-account gap in the last quarter of 2012, government data show.

Banks Rally

ICICI Bank increased 2.3 percent to 1,122.65 rupees, the highest level since March 12. State Bank of India jumped 2.4 percent to 2,299.65 rupees. Mortgage lender Housing Development Finance Corp. added 3.5 percent to 818.25 rupees. Tata Motors Ltd. jumped 4.2 percent to 282.45 rupees, the most since Jan. 9. Maruti Suzuki India Ltd., the nation’s biggest passenger car maker, rose 2 percent to 1,524.6 rupees, a two-month high.

“Lower interest rates will lead to an increase in lending and help revive demand for cars,” said Sunil Pachisia, vice president at Pratibhuti Viniyog Ltd. in Mumbai.

Car sales in India fell 6.7 percent to 1.89 million units in the 12-month period ended March, the most since 2001, as high funding costs cooled demand, a trade body said April 10.

Export Aid

Bharti Airtel surged 4.8 percent to 299.65 rupees, the highest level since March 18. Engineering company Larsen & Toubro Ltd. increased 3.6 percent to 1,475.45 rupees. Reliance Industries Ltd., the owner of the world’s largest refining complex, added 1 percent to 781.6 rupees. ITC rose 0.7 percent to 315.3 rupees, a record.

Measures announced today to boost exports contributed to the gains in stocks today. A policy giving subsidized credit to some exporters has been widened and rules for special economic zones eased, Commerce Minister Anand Sharma told reporters. The minimum land requirement for special economic zones, which give tax breaks to spur shipments, was halved, while a measure that lets producers import capital goods duty free for manufacturing export items was widened.

The Sensex has dropped 2.1 percent this year and trades at 12.8 times projected 12-month profits, down from this year’s peak of 13.8 times in January. The MSCI Emerging Markets Index trades at 10.1 times. Profit at three Sensex companies that have reported March quarter results so far has either matched or beaten estimates. Net income at about 43 percent of the 30 Sensex firms trailed forecasts in the three months ended Dec. 31, compared with 40 percent in the previous two quarters.

Foreigners bought a net $45.1 million of Indian shares on April 17, taking net inflows this year to $10.3 billion, data compiled by Bloomberg show. Net inflows last year totaled $24.5 billion, the most among 10 Asian markets tracked by Bloomberg.

To contact the reporter on this story: 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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