Indian Stocks End 3-Day Drop on Inflation Outlook, Global Rally

India’s benchmark stock index rose from a two-month low after a report showed inflation moderated to a 43-month low in May and as global stocks rallied.

The S&P BSE Sensex rebounded 1.9 percent to 19,177.93 at the close in Mumbai, paring the weekly loss to 1.3 percent. The gauge yesterday slid to its lowest level since April 17 and its 14-day relative strength index reached 30, a level that signals to some traders that the drop may reverse. ICICI Bank Ltd. rose the most in a month, leading its peers higher. Maruti Suzuki India Ltd. jumped the most in five weeks. Hindalco Industries Ltd. soared the most since September.

The wholesale price index rose 4.7 percent in May from a year ago, after climbing 4.89 percent in April, official data showed today. The Reserve Bank of India, the nation’s central bank, will keep its key rate unchanged at 7.5 percent on June 17, 15 of 25 analysts said in a Bloomberg survey. The RBI has said its threshold level for inflation may be about 5 percent.

“Inflation is trending down and that may nudge the RBI to cut the rate by 25 basis points on Monday,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd., said by telephone from Bangalore. “The market was oversold and a rebound was on the cards.”

ICICI Bank jumped 3.1 percent to 1,102.15 rupees. State Bank of India, the nation’s biggest lender, gained 1.3 percent to 2,045.85 rupees. Mortgage lender Housing Development Finance Corp. surged 2.8 percent to 835 rupees. Reliance Industries Ltd., owner of the world’s largest refining complex, jumped 3.2 percent to 814.65 rupees, its steepest climb since May 27.

Autos Rebound

Maruti Suzuki surged 4 percent to 1,514.15 rupees, ending a five-day, 8.2 percent slide. Tata Motors Ltd. increased 4.9 percent to 296.8 rupees after its Jaguar Land Rover unit said sales climbed 12 percent from the previous year in May.

Hindalco soared 7.1 percent to 103.65 rupees, paring this year’s slide to 21 percent. Sterlite Industries (India) Ltd., the biggest copper and zinc producer, rose 1.7 percent to 82.85 rupees. Jindal Steel & Power Ltd. added 2.7 percent to 243.15 rupees, paring this week’s loss to 13 percent, the most among the 30 Sensex companies.

Finance Minister Palaniappan Chidambaram yesterday signaled the government will implement more economic reforms to revive growth and said measures are being taken to stabilize the rupee. The government is seeking to build on the boost to investor sentiment after Fitch Ratings upgraded the nation’s outlook to stable from negative on June 12.

Fund Outflows

The rupee, which touched an all-time low of 58.9850 per dollar on June 11, gained 0.8 percent to 57.5287 at the 5 p.m. close. Seven of the 11 most-active Asian currencies have weakened against the dollar since June 7 on concern U.S. policy makers will pare stimulus that has driven inflows to emerging markets.

Foreigners sold a net $95 million of local shares on June 13, a third straight day of withdrawal, data from the regulator show. That reduced this year’s net purchases to $14.9 billion, still a record for the period, data compiled by Bloomberg show.

The MSCI Asia Pacific Index climbed as much as 1.6 percent today, after the regional gauge yesterday erased this year’s advance, as U.S. retail and jobless data exceeded forecasts and investors speculate the Fed will maintain the record stimulus.

The Sensex trades at 13.2 times projected 12-month earnings compared with the MSCI Emerging Markets Index’s 9.8 times. The Indian measure’s 100-day volatility climbed to 14.4 yesterday, the highest since Sept. 28. Volume on the gauge was 4 percent more than the 30-day average at this time of the day.

The 50-stock CNX Nifty index on the National Stock Exchange of India Ltd. surged 1.9 percent to 5,808.40. Its June futures settled at 5,801.25. India VIX fell 5.6 percent.

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