India’s Sensex Rebounds as Inflation Slows to 41-Month Low

Indian stocks climbed, with the benchmark index rebounding from its biggest drop in a year, after inflation slowed to a 41-month low.

The S&P BSE Sensex added 0.2 percent to 19,722.29 at close in Mumbai, with volume 16 percent below the 30-day average. The Sensex lost 2.1 percent yesterday, the most since May 8, 2012. Oil & Natural Gas Corp. had the steepest rally in a month and Housing Development Finance Corp. rose 0.9 percent. Cell-phone operator Bharti Airtel Ltd. increased the most in a week.

The wholesale-price index climbed 4.89 percent in April from a year earlier, the slowest pace since November 2009, data from the commerce ministry showed today. The median estimate of 29 economists in a Bloomberg survey was 5.45 percent. Reserve Bank of India Governor Duvvuri Subbarao on May 3 cut rates for a third time this year and said there is little space to ease further, citing the possibility of price pressures returning.

“The Reserve Bank has actually started more stimulus to the economy, inflation seems to be under bit more control and that gives the central bank a bit more flexibility to support economic growth,” Tai Hui, chief market strategist for Asia at JPMorgan Asset Management, said in an interview to Bloomberg TV India today. “I see limited downside risk from where we are now, especially from the growth side.”

ONGC advanced 1.8 percent to 326.75 rupees, the biggest rise since April 16. HDFC gained 0.9 percent to 870.85 rupees, the steepest advance since May 8. Bharti Airtel surged 1.8 percent to 317.25 rupees, the most since May 7.

State Bank of India, the nation’s biggest lender, added 0.7 percent to 2,293.05 rupees. Tata Motors increased 1 percent to 300.3 rupees. Sun Pharmaceutical Industries Ltd. jumped 2.1 percent to 963.7 rupees.

Global Easing

The RBI this month cut the repurchase rate to 7.25 percent from 7.5 percent, joining policy makers in Australia, Europe and South Korea in trimming funding costs to support growth. India’s economy grew 5 percent in the year ended March 31, the least since 2003, according to an estimate from the government.

Easing by global central banks has increased fund flows to emerging markets, including India. Foreign funds bought $88 million of local shares on May 13, taking this year’s inflows to a net $12.74 billion, data from the regulator show. That’s a record for the period, according to data compiled by Bloomberg.

The 50-stock CNX Nifty Index added 0.3 percent to 5,995.40. Its May futures settled at 6,006. India VIX, which gauges the cost of protection against losses in the Nifty, fell 0.3 percent to 17.17.

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