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India’s Sensex Climbs With Automakers After RBI Policy Decision

Television Coverage of Rajan at The BSE
People watch an electronic screen showing television coverage of Raghuram Rajan, governor of the Reserve Bank of India, speaking during a news conference at the central bank's headquarters, in the lobby of the Bombay Stock Exchange in Mumbai, India, on Tuesday, Aug. 5, 2014. Photographer: Dhiraj Singh/Bloomberg

Aug. 5 (Bloomberg) -- India’s benchmark stock-index gained for a second day after the nation’s central bank said it would fight inflation without derailing economic growth.

Tractor maker Mahindra & Mahindra Ltd. jumped 3.8 percent, sending a gauge of 12 automakers to a one-month high. Hindalco Industries Ltd. was the biggest advancer on the S&P BSE India Metals Index. Sun Pharmaceutical Industries Ltd. increased 1.6 percent, ending two days of losses.

The S&P BSE Sensex rose 0.7 percent to 25,908.01, erasing an intraday loss of 0.6 percent. Reserve Bank of India Governor Raghuram Rajan cut the proportion of deposits banks must invest in government debt, allowing them to lend more, even as he left borrowing costs unchanged. The RBI won’t hold rates “high any longer than necessary,” and curbing inflation will create the “best conditions” for growth, he told reporters in Mumbai after the policy decision.

“The RBI’s willingness to cut rates as soon as inflation comes down is a positive, and steps taken to infuse liquidity will be a growth catalyst,” Deven Choksey, managing director at Mumbai-based K.R. Choksey Shares & Securities Ltd., said by phone. “The appetite for good quality stocks is high and any correction is being used as a buying opportunity.”

Mahindra & Mahindra gained the most in a month while Bajaj Auto Ltd. surged 3.2 percent. Tata Motors Ltd., owner of Jaguar Land Rover, climbed for a second day.

Aluminum producer Hindalco jumped 2.5 percent to 195.65 rupees, while Sesa Sterlite Ltd., India’s biggest copper maker, and Tata Steel gained 1.9 percent each.

Europe Rebounds

The Sensex also rose as European stocks climbed for the first time in five days as results from Bayerische Motoren Werke AG and Credit Agricole SA exceeded analyst estimates. The Indian gauge has risen 21 percent this year as overseas funds bought a net $11.7 billion of local shares, the most in Asia, on speculation that Prime Minister Narendra Modi’s government will spur economic growth from a decade low.

Modi is pushing to stem price gains to allow the RBI to lower one of Asia’s highest policy rates. The consumer-price index has dropped for two straights months to 7.3 percent in June. While that’s the slowest pace since its creation in 2012, price gains are still the second-fastest among 18 Asia-Pacific economies tracked by Bloomberg. Rajan is pushing to slow retail inflation to below 8 percent in January 2015 and 6 percent in the following 12 months.

“Growth will be most benefited if we disinflate the economy and we don’t have to fight this fight again,” he said.

Hero MotoCorp Ltd. fell 0.7 percent to 2,583.3 rupees. The nation’s largest two-wheeler maker said after market hours that its first-quarter profit was 5.63 billion rupees. That’s lower than the 6.17-billion rupee estimate in a Bloomberg survey.

Nine of the 17 Sensex companies that have posted results so far for the June quarter have beaten or matched forecasts.

Foreign investors bought $70 million of local stocks on Aug. 4, ending three straight days of withdrawals.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Ravil Shirodkar, Indranil Ghosh

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