Most Indian Stocks Advance as Lenders Climb Amid Rate-Cut Bets

  • Small and medium-sized companies extend two weeks of advances
  • Inflation under control compared with few years ago: Jaitley

Most Indian stocks advanced, led by lenders and industrials, amid speculation the Federal Reserve’s decision to maintain its benchmark interest rates will pave the way for India’s central bank to cut borrowing costs next week.

Axis Bank Ltd. jumped to a one-month high, helping a gauge of lenders advance for a third day. Larsen & Toubro Ltd., the most valuable engineering company, rebounded after a three-day, 4.1 percent drop. Reliance Industries Ltd., owner of the world’s largest refining complex, was the worst performer on the S&P BSE Sensex, while ITC Ltd. decreased for a second day.

The S&P BSE 500 Index, a gauge of the broader market, capped a third day of gains, while a gauge of small and medium-sized companies climbed for a second day. The Sensex lost 0.1 percent to 26,192.98 at the close Monday, paring an intra-day loss of 0.9 percent. India needs reduce rates, and the Reserve Bank of India must decide how much to cut, Finance Minister Arun Jaitley said in an interview with Bloomberg Television in Hong Kong.

“With the Fed leaving things unchanged and the way inflation has been trending down, the chances of a rate cut are high," Nitasha Shankar, vice president for equity research at Yes Securities Ltd. in Mumbai, said in an interview with Bloomberg TV India on Monday. “The markets will remain volatile until the RBI meeting next week." The lender expects the benchmark interest rate to be cut by least 25 basis points, she said.

Inflation Slows

Governor Raghuram Rajan last month resisted pressure from the government to ease policy. He left the main rate unchanged at 7.25 percent at an Aug. 4 meeting after three cuts in 2015 to meet his inflation target of 6 percent by January. The next review meeting is on Sept. 29. Official data have shown that consumer price gains slowed to 3.66 percent in August as oil has tumbled below $50 a barrel and global food costs fell.

Axis Bank climbed 2 percent to its highest level since Aug. 20. State Bank of India rose 1.3 percent, extending last week’s 5.2 percent advance. ICICI Bank Ltd. and HDFC Bank Ltd. added at least 0.4 percent. All four banks were among the top 10 gainers on the Sensex.

Hindalco Industries Ltd., an aluminum producer, rallied 2.9 percent after falling as much as 2.2 percent. Maruti Suzuki India Ltd., the maker of half the cars sold in India, gained 2 percent in a sixth day of gains, while Larsen & Toubro rose 0.6 percent.

Reliance Industries lost 1.9 percent, halting last week’s 4 percent gain.
ITC fell 1.2 percent to a one-week low. Hindustan Unilever Ltd., India’s biggest household products maker, dropped 0.9 percent.

Motherson Sumi

Motherson Sumi Systems Ltd. tumbled 7.7 percent to its lowest price in 11 months, tracking a rout in shares of Volkswagen AG. The German carmaker, the biggest contributor to Motherson’s sales, lost a quarter of its market value after it admitted to cheating on U.S. air pollution tests for years. Motherson said it is assessing the full impact of Volkswagen’s admission on its future volumes.

Overseas investors bought a net $117 million of local shares on Sept. 18, taking this year’s inflows $4.1 billion. Foreign funds unloaded $2.6 billion of Indian shares in August, the worst outflow since October 2008.

The Sensex has fallen 4.8 percent this year and is valued at 14.9 times projected 12-month profits, data compiled by Bloomberg show. The MSCI Emerging Markets Index is valued at a multiple of 10.8.

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