Sensex Rises a Second Day to Pare Quarterly Loss After RBI Cut

  • Tata Steel leads rally by metal producers as Bharti, BHEL rise
  • India is top pick in emerging markets, Morgan Stanley says

Indian stocks climbed for a second day, trimming the benchmark equity gauge’s biggest quarterly loss in four years, after the nation’s central bank cut interest rates by more than economists estimated.

Tata Steel Ltd., the country’s top producer of the alloy, surged the most in three weeks, narrowing its quarterly loss to 30 percent. Hindalco Industries Ltd., an aluminum company, rose for the first time in six days. Bharti Airtel Ltd., the largest mobile-services provider, jumped the most in four months. Bharat Heavy Electricals Ltd., India’s biggest power-equipment maker, surged 4.2 percent.

Quarterly returns for Sensex companies

The S&P BSE Sensex jumped 1.5 percent to 26,154.83 at the close in Mumbai. The index slumped 5.9 percent this quarter, the most since the period ended December 2011. The Reserve Bank of India on Tuesday cut its benchmark interest rate by 50 basis points, twice as much as most economists surveyed by Bloomberg predicted. Governor Raghuram Rajan had left the repurchase rate unchanged in August, resisting government pressure to lower one of Asia’s highest borrowing costs as consumer prices slow.

“India remains our number one pick in global emerging-market equities currently,” Jonathan Garner, the Hong Kong-based chief Asia and emerging-market strategist at Morgan Stanley Asia Ltd., said by e-mail on Wednesday. “We expect further outperformance on this news.”

The Sensex trades at 15 times projected 12-month earnings, compared with a multiple of 10.6 for the MSCI Emerging Markets Index.

Foreign Outflows

Foreign investors sold $103 million of local stocks on Sept. 28, taking this quarter’s outflows to $2.44 billion, amid a stock rout in China and expectations that the Federal Reserve is close to raising interest rates. The withdrawals are on course to be the largest for any quarter since 2008. That includes a withdrawal of $1.18 billion during the quarter through Sept. 29 by India-focused exchange-traded funds, according to data compiled by Bloomberg.

Central bank governor Rajan said after the rate cut on Tuesday, the RBI’s biggest since 2009, that he will focus on working with Prime Minister Narendra Modi’s government to eliminate any excuses from banks for keeping borrowing costs high. Median bank lending rates fell by only about 30 basis points this year, compared with a reduction of 75 basis points in the RBI’s benchmark rate, Rajan said before the central bank’s latest move.

Tata Steel rallied 5.6 percent, the day’s biggest percentage gainer on the Sensex. Hindalco Industries advanced 3.8 percent, trimming its quarterly decline to 37 percent. Bharti jumped 4.7 percent, while Bharat Heavy Electricals gained for a second day. Coal India Ltd., the world’s biggest producer of the fuel, added 3.9 percent.

The 50-stock CNX Nifty index climbed 1.4 percent to 7,948.90. The India VIX, a benchmark gauge of option costs, lost 9 percent to 19.6250, its biggest drop since Sept. 18.

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