India's Sensex Climbs Most in a Week Before U.S. Fed Meeting

  • Gauge rises in last hour of trading, tracking European markets
  • Foreign fund inflow this month increases to $1.7 billion

Indian stocks rose in the last hour of trade, tracking a rally in European shares before the U.S. Federal Reserve’s policy review, as lenders and drugmakers advanced.

ICICI Bank Ltd., the country’s biggest private lender, was the top gainer on the S&P BSE Sensex. Drugmakers Cipla Ltd. and Lupin Ltd. climbed for a second time this week. ITC Ltd., the largest cigarette maker, increased the most in two weeks. Infosys Ltd., the second-largest software services provider, rose for the first time in three days.

The Sensex advanced 0.5 percent to 24,682.48 at the close in Mumbai, after dropping as much as 0.8 percent earlier. European stocks climbed, Asian equities fell and the dollar strengthened against most major currencies before a Federal Reserve policy review on Wednesday that may shed light on the timing of U.S. interest-rate increases.

“European markets climbed and we followed as nobody wants to get caught on the wrong foot,” Paras Bothra, vice president of equity research at Ashika Stock Broking Ltd., said in an interview from Mumbai. “Traders are positioning for some positive news from the Fed. Our markets are also taking comfort from the good foreign fund inflows this month."

Monetary Stimulus

Global markets are being swayed by divergent monetary policies in the world’s leading economies. While Fed funds futures show the odds of a U.S. rate increase by the end of June have shot up to 54 percent from about 6 percent in the past month, easing in China and last week’s announcement of unprecedented stimulus by the European Central Bank have helped claw-back the bulk of 2016’s stock-market losses.

“The amount of reliance on central banks globally is not being matched by government actions,” Shiv Puri, managing Director at TVF Capital Advisors, said in an interview with Bloomberg TV India on Wednesday. “The big risk is that the market may not give central bankers credibility.”

In India, equities have risen in all but two days this month after Finance Minister Arun Jaitley in his Feb. 29 budget pledged to further cut the fiscal deficit, stoking speculation of a interest-rate cut by the central bank. Reserve Bank of India Governor Raghuram Rajan said over the weekend the central bank was "comforted" by the government’s plan to shrink the budget deficit to 3.5 percent of GDP while telling reporters to "wait and see" how that feeds into monetary policy. He is due to review policy on April 5.

ICICI Bank rose to its highest level since Jan. 29, paring this year’s decline to 13 percent. Cipla added 1.1 percent. Lupin climbed 1.6 percent after plunging 7.8 percent on Tuesday.

ITC increased the most since March 1. Infosys had the steepest climb since March 2.

The Sensex has risen 7.3 percent this month and trades at 15.1 times 12-month projected earnings after global funds turned net buyers. Foreigners bought $188 million of domestic shares on March 14, paring this year’s outflows to $1.2 billion.

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