India’s Sensex Climbs for Third Day Before Fed Decides on Rate

  • Traders pricing in 76% odds that Fed will raise interest rate
  • ONGC, Bharti, ICICI Rally, while Mahindra & Mahindra tumbles

Indian stocks advanced for a third day, helped by energy companies, as Asian equities climbed before the U.S. Federal Reserve’s decision on interest rates.

Oil & Natural Gas Corp., India’s largest state-owned oil explorer, gained for a second day after falling to its lowest level since May 2009 on Monday as crude rebounded from a six-year low. GAIL India Ltd., the biggest natural-gas supplier, climbed the most in a week. Bharti Airtel Ltd., the top mobile-phone operator, surged the most in two months.

The S&P BSE Sensex added 0.7 percent to 25,494.37 at the close, tracking advances in the MSCI Asia Pacific Index, which capped its biggest gain in more than two months. Traders and economists expect the Fed will boost key rates Wednesday, while indicating that any subsequent hikes will be gradual as long as economic growth remains steady.

“Almost everyone expects this to happen so it is safe to assume that most people have also positioned for it," Neelkanth Mishra, managing director for equity research at Credit Suisse Securities (India) Pvt., said in an interview with Bloomberg TV India. “The rate increase by itself shouldn’t immediately lead to volatility.” Mishra said he’s bullish on sectors linked to the local economy and underweight on those with global linkages.

Capital Inflows

Concern that higher U.S. borrowing costs will damp demand for developing-nation assets has lingered over markets for most of the year. Foreign funds sold a net $9.5 million of shares on Dec. 14, paring this year’s investment to $2.74 billion. The annual inflow is the smallest since 2011, when they withdrew $511 million from Indian equities.

Oil & Natural Gas jumped 4.1 percent, the most since Oct. 7 and the top performer on the Sensex. GAIL climbed 0.9 percent, taking this quarter’s advance to 14 percent.

Indraprastha Gas Ltd. surged the most since July 1 and Gujarat Gas Ltd. rose 5.2 percent. India’s top court temporarily banned some new diesel vehicles in Delhi and said only cabs running on CNG would be permitted to ply in the state and the National Capital Region. The measures are aimed at curbing the alarming rise in pollution levels in the city.

CNG Demand

Mahindra & Mahindra Ltd. tumbled the most since August. India’s biggest maker of sport utility vehicles gets about 2 percent of its monthly sales volume from Delhi.

“Gas volumes are going to rise as more people start opting for CNG-run vehicles and Delhi govt. expands its fleet of CNG buses,” said Piyush Jain, an analyst at Morningstar Investment Services. “Indraprastha is the biggest gainer from the ban on diesel cars. Push for cleaner fuels like natural gas is also positive for other gas companies such as GAIL and Gujarat Gas.”

Bharti Airtel soared 3.6 percent, the most since Oct. 19. ICICI Bank added 2.3 percent, ending a six-day decline.

The Sensex has fallen 7.3 percent this year and trades at 15 times projected 12-month earnings. The MSCI Emerging Markets Index is valued at a multiple of 11.

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