India’s Sensex Advances to One-Month High on Rate-Cut Optimism

Indian stocks advanced, with the benchmark index reaching its highest level in more than a month amid expectations slowing inflation and lower commodity prices may prompt the central bank to cut borrowing costs next week.

The S&P BSE Sensex jumped 0.8 percent to 19,169.83 in Mumbai, the highest close since March 18. The gauge climbed 4.2 percent last week, the most since the period ended Nov. 30, as data showed wholesale prices in March slowed to a 40-month low. Coal India Ltd., the world’s top producer of the fuel, climbed the most in more than a year. HDFC Bank Ltd. surged 3.7 percent ahead of its results tomorrow. Wipro Ltd. sank 8 percent after its revenue guidance disappointed investors.

India’s Finance Minister Palaniappan Chidambaram said a further cut in interest rates by the central bank would help revive growth. He made the comments in an April 19 interview from Washington, where he was attending meetings of the World Bank and the International Monetary Fund. The Reserve Bank of India may reduce the key rate by 25 basis points at its May 3 review, according to 14 of 16 economists in a Bloomberg survey.

“The RBI should ease as inflation has fallen below 6 percent,” said Suresh Mahadevan, managing director at UBS Securities India Pvt., in an interview with Bloomberg TV India today. “The weakness in gold and crude certainly plays into India’s strength. We are constructive on the market.”

Coal India climbed 4.3 percent to 312.50 rupees, the most since January last year. The company plans to invest 50 billion rupees in the year ending March, Press Trust of India reported April 19. HDFC Bank, India’s second-largest non-state lender, jumped 3.7 percent to 698.30 rupees, the most since June 6. Larger rival ICICI Bank Ltd. gained 2.3 percent to 1,148.45 rupees, its highest close since Feb. 6.

Oil, Gold

Brent oil slid below $100 a barrel last week for the first time since July and gold had its biggest drop in three decades. The fall in prices of the two commodities could help cut import costs by almost $7 billion in the 12 months ending March 2014, Barclays Plc said in an April 17 note.

India relies on imports to meet more than 80 percent of its oil requirements and is the world’s largest buyer of the precious metal. Overseas purchases of the two commodities added to a record $32.6 billion current-account deficit in the last quarter of 2012, according to government data.

The Sensex is valued at 12.9 times projected 12-month profits, compared with a multiple of 10.3 times for the MSCI Emerging Markets Index. The gauge is still down 1.3 percent this year, given concerns about the current-account deficit, slowing economic growth and the highest inflation rate among major emerging nations.

‘Weak Guidance’

Wipro, the technology-services company controlled by billionaire Azim Premji, tumbled 8 percent to 339.40 rupees, the lowest price since Oct. 26, after giving a weaker first-quarter revenue guidance. Larger rival Infosys Ltd. slid 2.2 percent to 2,244.55 rupees, the lowest close since Aug. 6.

“We are starting the year with a little weaker guidance, but our expectation would be, of course, that we do better in the current fiscal year than what we did last year,” Suresh C. Senapaty, Wipro’s chief financial officer, said April 19. The company forecast $1.575 billion to $1.610 billion of revenue from information-technology services for the quarter.

Profit at four Sensex companies that have reported March quarter results so far has either matched or beaten analysts’ estimates. Net income at about 43 percent of the 30 Sensex firms trailed forecasts in the three months ended Dec. 31, compared with 40 percent in the previous two quarters.

Larsen & Toubro Ltd., the nation’s biggest engineering company, climbed 4 percent to 1,533.85 rupees, the most since Sept. 21. Power-equipment maker Bharat Heavy Electricals Ltd. advanced 3 percent to 191.35 rupees.

Fund Inflows

Foreign funds bought a net $45.1 million of local shares April 17, data compiled by Bloomberg show. Their net equity investment in stocks this year is $10.3 billion, the data show. Inflows last year were $24.5 billion, the most among 10 Asian markets tracked by Bloomberg.

Volumes on the Sensex were 15 percent below the 30-day average today. The 50-stock CNX Nifty Index on the National Stock Exchange of India Ltd. jumped 0.9 percent to 5,834.40 while its April futures traded at 5,840.85. India VIX, which measures the cost of protection against losses in the Nifty, rallied 5.6 percent to 16.22.

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