Indian stocks rose for a second day on optimism the central bank will reduce interest rates to revive growth and as Asian equities gained.
Mortgage lender Housing Development Finance Corp climbed 2.3%, the most in almost three weeks, and software exporter Infosys advanced 1.3%, helping to push the S&P BSE Sensex up 0.4% as in Mumbai.
Tata Power rallied 2.5% after it secured a defense ministry order worth Rs2bn ($29mn). Equities rose across Asia as markets rebounded from declines seen in the immediate aftermath of Italy’s vote against constitutional reform. Most economists see the Reserve Bank of India cutting its repurchase rate today as Prime Minister Narendra Modi’s surprise move to invalidate high- denomination bank notes threatens to curb economic growth.
“The market is rising on hopes the RBI will cut rates by 50 basis points,” said AK Prabhakar, head of research at IDBI Capital Market Services in Mumbai. The government needs to boost the manufacturing and services sectors as the demonetisation has stymied demand, he said.
Thirty of 39 economists surveyed by Bloomberg forecast the RBI will cut the repurchase rate by 25 basis points to 6%. Three project a reduction to 5.75% and the rest see no change.
Global funds pulled $2.6bn from local equities in November, the most since October 2008, amid a selloff in emerging markets and fallout from Modi’s currency policy that was aimed at tackling corruption. The Sensex gauge fell 4.6%, its biggest monthly decline since February. Meanwhile the rupee yesterday closed stronger for the sixth consecutive sessions to hit a nearly three-week high against the US dollar, as the two-day monetary policy committee meeting started. The rupee closed at 67.90 per US dollar — a level last seen on September 17, up 0.47%, the biggest gains in one-and-a-half month, from its previous close of 68.22.
The home currency opened at 68.10 against the US dollar and touched a high of 67.87, a level last seen on November 17. So far this year, it has fallen 2.8%. The committee will discuss and vote on what the Reserve Bank of India (RBI) should do with its policy rates. The RBI may cut interest rates by 25 basis points (bps) today to boost growth as the government’s unexpected withdrawal of high-value banknotes is likely to hurt consumption.
In the October policy, the newly constituted monetary policy committee cut the benchmark repo rate by 25 bps. Minutes of the committee’s meeting showed that the panel was concerned about economic growth.
The benchmark 10-year government bond yield closed at 6.203%, compared to Monday’s close of 6.217%. Bond yields and prices move in opposite directions.
So far this year, foreign institutional investors have bought $4.08bn in equities and sold $3.89bn in debt.
Asian currencies were trading higher. Indonesian rupiah was up 0.524%, Taiwan dollar 0.326%, South Korean won 0.296%, Malaysian ringgit 0.293%, China renminbi 0.032%, and Philippines peso rose 0.08%. However, Japanese yen 0.184%, China offshore was down 0.151%, Singapore Dollar lost 0.099% and Hong Kong Dollar lost 0.1%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 100.12, up 0.03% from its previous close of 100.09.
The rupee closed at 67.90 per US dollar, a level last seen on September 17, up 0.47%, the biggest gains in one-and-a-half month
