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Sensex Climbs to 5-Week High as Indian Inflation Below Estimate

Jan. 15 (Bloomberg) -- India’s benchmark stock index rose to its highest level in five weeks, led by banks and automobile companies, after inflation slowed more than economists expected in December to a five-month low.

ICICI Bank Ltd. increased 2.1 percent, sending a gauge of lenders to its highest level in two weeks. Hero MotoCorp Ltd. added 1.8 percent, helping a measure of 10 automakers to its biggest gain in a month. Coal India Ltd. advanced to a one-week high after saying it’ll pay a record dividend.

The S&P BSE Sensex increased 1.2 percent to 21,289.49, the highest close since Dec. 9. The wholesale-price index rose 6.16 percent, below a Bloomberg survey median of 6.99 percent, giving the central bank scope to keep interest rates on hold for a second consecutive meeting later this month. Reserve Bank of India Governor Raghuram Rajan left the main rate unchanged at 7.75 percent on Dec. 18, saying the bank is awaiting more data. His next review is due on Jan. 28.

“We expect the RBI to hold borrowing costs, and any cut will come in the latter half of the year,” S. Naganath, chief investment officer with DSP BlackRock Investment Managers Pvt., which manages $5 billion, said in Mumbai today. “Inflation will come down over the next 12 months.”

ICICI Bank, the country’s second-biggest lender, cut this year’s loss to 3.7 percent. Mortgage lender Housing Development Finance Corp. rallied 2.6 percent. The S&P BSE Bankex rose 1.6 percent. Hero MotoCorp jumped the most in four weeks. The S&P BSE India Auto Index added 1.2 percent, the most since Dec. 20.

Record Crops

“Inflation will moderate further due to better monsoon and good harvests,” Gajendra Nagpal, executive officer at Augment Financial Services Pvt., said by phone from New Delhi. A cooling in consumer prices will prompt the central bank to cut rates, benefiting banks, automakers and developers, he said.

India received 37 inches of rain in the annual wet season that extends from June 1 to Sept. 30, the most in six years, according to the nation’s weather office. Food-grain output in the 2013-2014 season may climb to a record, Agriculture Minister Sharad Pawar said in September.

Coal India jumped 2.2 percent to 295.2 rupees. The world’s producer miner of the fuel will pay a record 183 billion rupees ($3 billion) in dividend to help the government fund its budget shortfall, the company said yesterday after the market closed. The payout of 29 rupees a share pushed up the dividend yield to 10 percent from 4.84 percent, data compiled by Bloomberg show.

Engineering company Larsen & Toubro Ltd. rose 2.8 percent, the most in five weeks. Sesa Sterlite Ltd. jumped 2.4 percent, ending three days of losses while aluminum producer Hindalco Industries Ltd. had the biggest advance in three weeks. The two companies were among the top 10 gainers on the S&P BSE India Metal Index today.

Global investors bought a combined $28 million of local shares on Jan. 13 and 14, data released by the stock market regulator today show. Banks were closed yesterday for a public holiday. Foreigners invested $20 billion last year, the most in Asia after Japan, according to data compiled by Bloomberg. Net purchases in 2012 were $24.6 billion, the data show.

The 50-stock CNX Nifty Index rose 1.3 percent to 6,320.90. The Sensex is valued at 13.3 times projected 12-month profits, data compiled by Bloomberg show. The MSCI Emerging Markets Index is valued at 10.3 times earnings.

To contact the reporter on this story: 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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