Indian Stocks Climb for Second Day Before Fed as Unilever Gains

  • Consumer goods, energy companies among top gainers on Sensex
  • Traders pricing in 76% odds that Fed will raise interest rate

Indian stocks rose for a second day as emerging-market equities rebounded from a six-year low before the U.S. Federal Reserve’s decision on interest rates.

Sun Pharmaceutical Industries Ltd., the nation’s most valuable drugmaker, rose to a one-week high after it agreed to sell a manufacturing unit in the U.S. Hindustan Unilever Ltd., the biggest home-products maker, rallied to a three-month high. Oil & Natural Gas Corp., the largest state explorer, rose from its lowest price since May 2009.

The S&P BSE Sensex climbed 0.7 percent at the close, after changing direction at least six times. The Federal Reserve begins its two-day meeting on Tuesday, with traders pricing in 76 percent odds that rates will be raised for the first time in almost a decade. A rout in oil will help outweigh the impact of the Fed’s decision on India, which imports 80 percent of its energy needs, according to AdviseSure Ventures Pvt.

“India is likely to decouple a bit from other emerging markets as the benefit of lower oil prices will overshadow concerns about the Fed’s rate decision,” Abhimanyu Sofat, the co-founder of Mumbai-based investment advisory firm, said by phone. “European equities also opened strong, aiding sentiment.”

Foreigners have pulled $489 million from local shares this month before the Fed’s rate decision and as concerns grew on the passage of a unified sales tax bill in parliament. Opposition lawmakers are protesting an Indian court order for the Congress party’s top leaders to testify in a corruption case, raising the risk of further delays to the tax bill that is the centerpiece of Prime Minister Narendra Modi’s reform push.

“Investors are tracking poltical developments as the Congress can’t continue to drag its feet on GST for long,” Sofat said.

India’s consumer prices rose 5.4 percent in November from a year earlier, following a 5 percent increase in October, according to data released after market hours Monday. The gain may pose a challenge for Reserve Bank of India Governor Raghuram Rajan, who left one of the highest interest rate in major Asian economies unchanged this month as risks to his inflation target of 5 percent by March 2017 increase.

Rajan expects the Fed to raise interest rates by as much as a quarter point this week.

Global investors bought a net $46 million of Indian stocks on Dec. 11, ending six days of outflows. The Sensex has fallen 8 percent this year and trades at 14.9 times projected 12-month earnings. The MSCI Emerging Markets Index is valued at a multiple of 10.8.

Before it's here, it's on the Bloomberg Terminal.