Indian Stocks Climb to 2-Week High as Inflation Falls by Record

  • Consumer price inflation data awaited after market hours
  • Metal stocks lead rally on report of import duty hike

India’s benchmark stock index advanced to a two-week high after factory output and inflation data signaled an improving outlook for Asia’s third-biggest economy.

Tata Steel Ltd. climbed to a one-month high after the Press Trust of India reported that the board of safeguards has upheld a plan to levy an import duty on some steel products. Vedanta Ltd., the largest copper producer, and NTPC Ltd., the top power generator, were the best performers on the S&P BSE Sensex. State Bank of India and Axis Bank Ltd. paced gains among lenders as a drop in the inflation rate improved odds for a rate cut by the central bank.

The Sensex surged 1 percent to 25,856.70 at the close, extending last week’s 1.6 percent increase. The first of the country’s two main inflation gauges due Monday showed a deepening price decline, while industrial output in July expanded faster than expected, data showed Friday. The Federal Open Market Committee will meet this week to decide on U.S. interest rates.

“The wholesale price inflation has reconfirmed to the street that consumer price inflation would be lower than expected," Aneesh Srivastava, the chief investment officer at IDBI Federal Life Insurance Co., said by phone from Mumbai. Some traders also closed bearish bets before the Fed meeting, adding to the rally, he said.

Wholesale prices declined 4.95 percent in August from a year earlier after falling 4.05 percent in July. The median of 32 economists in a Bloomberg survey had predicted a 4.4 percent drop. Consumer-price inflation probably eased to 3.58 percent in August from 3.78 percent in July, according to a Bloomberg survey of 30 economists. The data is due later on Monday.

Rate Decisions

The Federal Open Market Committee will meet this week to decide whether to raise borrowing costs for the first time since 2006, with traders holding odds of an increase at 28 percent. Reserve Bank of India Governor Raghuram Rajan has resisted growing pressure from the government to ease monetary policy amid cooling inflation, leaving rates unchanged in August. His next policy review is scheduled on Sept. 29.

Tata Steel surged 3.8 percent, paring this year’s loss to 39 percent. Steel Authority of India increased 2 percent and JSW Steel Ltd. jumped 3.1 percent. The Board of Safeguards has approved the recommendation of the Directorate General of Safeguards for levying a 20 percent duty on certain steel products to protect the interests of the domestic industry, Press Trust said, citing an official it didn’t identify. Indian steelmakers had complained of a surge in imports from China, South Korea, Japan and Russia, the report said.

Vedanta increased 4.4 percent to its highest since Aug. 19. NTPC jumped 5.2 percent to a three-week high. State Bank gained 2.2 percent, while Axis Bank advanced 3.1 percent.

The India VIX index, the benchmark measure of equity-option prices, fell 2.6 percent. The 50-stock CNX Nifty Index rose 1.1 percent to 7,872.25.

International investors sold a net $5.6 million of Indian stocks on Sept. 10, paring this year’s inflows to $3.6 billion. The Sensex trades at 14.7 times projected 12-month earnings, compared with a multiple of 10.7 for the MSCI Emerging Markets Index.

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