India’s benchmark stock-index advanced for a second day, led by metal producers and automakers, after China’s cut in interest rates spurred gains in Asian equities.
Hindalco Industries Ltd., an aluminum and copper producer, jumped to a one-week high and Tata Steel Ltd. increased for the first time in four days. Hero MotoCorp Ltd. climbed the most in six months, while Tata Motors Ltd., owner of Jaguar Land Rover, rallied to a two-week high. State Bank of India was the best performer on the S&P BSE Sensex. A gauge of mid-sized companies rallied 2.1 percent, the most since Dec. 18.
The Sensex jumped 1.5 percent to 27,507.3 at the close, capping the biggest two-day gain since last May. The measure climbed on Friday after falling more than 10 percent from its Jan. 29 record on Thursday to enter a so-called correction that sent valuations to the lowest level in almost a year. The MSCI Asia Pacific Index rose 0.4 percent after China lowered rates for the third time in six months.
“The market is less overvalued than it was three months ago, and one year ahead, the economy will be coming out of a structural downturn,” Arvind Sethi, the Mumbai-based chief executive officer at Tata Asset Management Ltd., said in an interview with Bloomberg TV India. “The government is going ahead with reforms.”
The Sensex is now valued at 15.2 times projected 12-month profits, versus the MSCI Emerging Markets Index’s multiple of 12.4. Valuations of the Indian gauge climbed to a four-year high on April 13, data compiled by Bloomberg show.
Indian equities also rose on speculation slowing consumer prices will allow the central bank to add to two interest-rate cuts this year, according to Paras Bothra, vice president of equity research at Ashika Stock Broking Ltd.
Retail inflation probably rose 4.90 percent in April from a year earlier, the median estimate in a Bloomberg survey shows before data due on Tuesday. That’s less than an increase of 5.17 percent in March.
Reserve Bank of India Governor Raghuram Rajan maintained rates at a scheduled review April 7 as he waited for banks to pass on two previous cuts to customers. He said his next move would depend on data showing risks to inflation, which he’s mandated to keep below 6 percent by January.
Foreigners sold a net $54.5 million of equities on Friday, extending outflows that began on April 22 amid growing concern about the government’s ability to push through reforms. The withdrawal pared this year’s inflows to $6.7 billion.
Lawmakers are scheduled to debate legislation related to a goods-and-services tax in the upper house of parliament, where Prime Minister Narendra Modi’s government lacks a majority. The bill was passed in the lower house on Thursday. Modi has used a temporary executive order on easing land purchases by companies to pressure lawmakers into approving the legislation that has been blocked in parliament.
The CNX Nifty Index on the National Stock Exchange of India Ltd. rallied 1.6 percent to 8,325.25, climbing above its 200-day average after breaching it on May 5.
The benchmark gauge of Indian option prices declined for a third day. The India VIX Index slid 2.5 percent to 18.62, data compiled by Bloomberg show.