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Indian Stocks Climb to 3-Year High as RBI Eases Liquidity Curbs

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Oct. 29 (Bloomberg) -- India’s benchmark stock index rose to a three-year high after the central bank took steps to boost cash supply for banks while raising key borrowing costs.

ICICI Bank Ltd. jumped 5.9 percent, helping a gauge of 13 lenders climb to its highest since July. Carmaker Maruti Suzuki India Ltd. surged the most in 21 months after its quarterly net income almost tripled. Tata Steel Ltd., the biggest producer of the alloy, surged 4.3 percent, ending a four-day slide.

The S&P BSE Sensex added 1.7 percent to 20,929.01 at the close, its highest level since Nov. 9, 2010. The gain, which ended a five-day decline, was the most among Asian benchmark indexes. Reserve Bank of India Governor Raghuram Rajan cut the marginal standing facility rate to 8.75 percent from 9 percent, making short-term funds cheaper for banks. The cost was raised in July in an emergency move to stem the drop in the currency.

“The liquidity boost will help support growth,” Debasish Mallick, chief executive officer at IDBI Mutual Fund in Mumbai, said by telephone today. “With the cut in the MSF rate, the RBI has reversed steps it took to support the rupee.”

Rajan, who pledged to contain price increases after taking charge of the RBI last month, raised the repurchase rate by 25 basis points to 7.75 percent today, as 32 of 42 analysts in a Bloomberg News survey predicted. He unexpectedly increased the benchmark rate by a quarter point in his first policy review on Sept. 20 to cool consumer-price inflation of almost 10 percent.

ICICI Bank surged to its highest level since July 2. State Bank of India advanced 3.9 percent, driving the S&P BSE Bankex Index to its highest close since July 15.

Maruti, Ranbaxy

Maruti Suzuki jumped 8.1 percent, its highest close since May 30. The company reported after trading ended yesterday that net income almost tripled to 6.7 billion rupees ($109 million) in the September quarter.

Tata Steel climbed the most since Oct. 18. Sesa Sterlite Ltd., the biggest copper producer, soared 2.6 percent. Aluminum producer Hindalco Industries Ltd. jumped 3 percent.

Drugmaker Ranbaxy Laboratories Ltd. reported an unexpected third-quarter loss of 4.54 billion rupees compared with a 1.5 billion-rupee profit estimated by 29 analysts in a survey. The stock fell 0.6 percent.

The Sensex has gained 7.7 percent this year and trades at 14.2 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 10.7 times. Quarterly profits at 13 of 14 companies in the Indian gauge that have posted earnings so far this season have beaten or matched estimates, data compiled by Bloomberg show. About 47 percent of the companies trailed forecasts in the June quarter.

Foreign investors bought a net $107 million of domestic shares on Oct. 28, taking this year’s inflow to $15.7 billion, data from the regulator showed yesterday. They have purchased $2.27 billion of shares this month, extending September’s $2 billion inflow.

The 50-stock CNX Nifty Index soared 2 percent to 6,220.90, a three-year high. The India VIX, which measures the cost of protection against losses in the Nifty, plunged 7.2 percent to its lowest level in more than two months.

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: Michael Patterson at mpatterson10@bloomberg.net

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