India’s ADRs Climb as Central Bank Action Bolsters Rupee

Indian stocks surged the most in five months in New York and the rupee jumped as the new central bank governor eased restrictions on overseas borrowing and said containing inflation expectations is his top priority.

The Bank of New York Mellon India ADR Index climbed 3.8 percent to 924.30 yesterday, the biggest rally since April 10. American depositary receipts of ICICI Bank Ltd., the nation’s biggest private lender, added 5.7 percent, and automaker Tata Motors Ltd. gained 5.3 percent. The S&P BSE Sensex climbed 1.8 percent in Mumbai, while the rupee rebounded from near a record low on speculation the Reserve Bank of India sold dollars.

The RBI likely intervened to prevent the rupee from dropping past its all-time low reached last week, according to two traders who asked not to be named as the information isn’t public. The monetary authority allowed companies to borrow from foreign shareholders, according to a statement. New governor Raghuram Rajan said monetary stability is the RBI’s primary role and “this means low and stable expectations of inflation.”

The rally was mainly due to “comments from new RBI Governor Rajan,” Greg Lesko, managing director at New York-based Deltec Asset Management LLC, which oversees $750 million in assets, said by e-mail. Falling oil prices are also helping, he said.

West Texas Intermediate crude futures slid the most in two weeks in New York as the U.S. considered limiting the scale of military strikes on Syria.

Global Crisis

Rajan, credited with predicting the 2008 global financial crisis, began a three-year term as RBI head yesterday after serving as top adviser to India’s finance minister since 2012. The former International Monetary Fund chief economist, giving his first briefing in Mumbai after taking office, said India remains a sound economy even as it faces challenges.

The rupee is posting the worst performance among 24 developing-nation currencies tracked by Bloomberg this quarter, as the prospect of less U.S. monetary stimulus and India’s record current-account gap prompted investors to pull out funds. The currency tops Rajan’s agenda, Arvind Virmani, a member of the RBI’s advisory panel on monetary policy, said by e-mail. The rupee climbed to 67.09 per dollar the close in Mumbai after falling as much as 1.3 percent to 68.62 earlier.

Rajan, the top adviser in India’s Finance Ministry since 2012, brings with him an authority that could usher in changes at the RBI and influence reforms both at financial regulators and in the Finance Ministry, Virmani said.

Stimulus Package

ADRs of ICICI, based in Mumbai, advanced to $26.95, capping the steepest rally since November. Tata Motors, India’s biggest automaker, rallied to $23.50. India’s Heavy Industries Ministry is working to help the auto industry get a stimulus package from the government, Minister Praful Patel said in New Delhi yesterday. Wipro Ltd., a software exporter, climbed 4.8 percent to $9.32 in New York, rising the most since Aug. 13.

The Sensex has lost 22 percent in dollar terms this year. The gauge is valued at 13.2 times projected 12-month earnings, compared with 14.3 times on July 23, and has lost 4.4 percent this year in local currency terms.

International investors bought a net $76 million of Indian shares on Sept. 2, data from the regulator showed. That increased this year’s net inflow to $11.5 billion, the second-highest among 10 Asian markets tracked by Bloomberg.

The CNX Nifty on the National Stock Exchange gained 2 percent to 5,448.10. India VIX, which measures the cost of protection against losses in the Nifty, fell 4.3 percent.

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