Indian Stocks Advance as Oil Drop Raises Rate-Cut ExpectationsRajhkumar K Shaaw and Santanu Chakraborty
Indian stocks rose for a second day on optimism the drop in oil prices to a four-year low will help ease price pressures further and prompt the central bank to cut borrowing costs at its meeting next week.
Bharat Heavy Electricals Ltd., the biggest power-equipment maker, rallied to an eight-month high. Hindustan Unilever Ltd., the largest home-products maker, and Infosys Ltd., the nation’s second-biggest software exporter, climbed to records. Indian Oil Corp. paced gains among state-owned refiners.
The S&P BSE Sensex added 0.2 percent to 28,438.91 at the close. The gauge is set for a sixth weekly gain as falling oil costs helped send consumer inflation below the Reserve Bank of India Governor Raghuram Rajan’s 6 percent goal. Credit Agricole CIB and Capital Economics Ltd. predict the RBI will reduce the main interest rate at its policy review on Dec. 2.
“The drop in oil may lead to further easing in inflation, helping the RBI lower rates,” Jitendra Panda, chief executive officer at Peerless Securities Ltd., said by phone from Kolkata.
Brent crude slid to the lowest in more than four years on speculation that OPEC will refrain from reducing output limits at its meeting in Vienna. The 31-percent decline in prices this year has helped reduce costs for India, which imports about 80 percent of its oil.
Consumer-price inflation eased to 5.52 percent last month from as high as 11.16 percent in November 2013 also as Rajan raised rates three times from September 2013 through January.
Bharat Heavy surged 4.8 percent, the best performer on the Sensex. Hindustan Unilever increased 2.6 percent, taking this year’s gains to 38 percent. Infosys added 1.5 percent. Aluminum producer Hindalco Industries Ltd. gained 2 percent to its highest level since Sept. 11.
Indian Oil increased 1.8 percent, taking this year’s gains to 63 percent. Bharat Petroleum Corp. added 1.8 percent, ending a three-day slide. Hindustan Petroleum Corp. rose 3.3 percent, the most since Nov. 7.
The Sensex has closed at a record six times this month as foreigners bought $1.8 billion of domestic shares, the biggest inflow since July. The measure’s valuation reached 15.8 times projected 12-month profits on Nov. 24, the most expensive since Sept. 9, data compiled by Bloomberg show.
“Valuations are looking a bit stretched and investors should be cautious going into December,” Peerless’ Panda said.
Traders rolled over 72 percent of November futures as of 4:16 p.m. in Mumbai, compared with the three-month average of 67 percent the day of expiration, data compiled by Bloomberg show. The India VIX, a gauge of protection against stock-market losses using options, fell 1.9 percent.