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Bloomberg/Mumbai
Indian stocks advanced the most in a month after the goverment’s economic survey said growth is recovering. Industrial and energy stocks gained.
The S&P BSE Sensex index rose 0.7% to 19,152.41 at the close, the sharpest gain since January 25, and volumes were 23% more than the 30-day average. Larsen & Toubro, the country’s biggest engineering company, climbed the most in five months. Reliance Industries, owner of the world’s largest refining complex, jumped 1%. Cigarette maker ITC had the steepest gain in almost a month amid report it plans to raise prices.
The downturn in Asia’s third-largest economy may be over and the recent policy measures aimed at bolstering investment will yield faster growth, the survey said. Finance Minister Palaniappan Chidambaram, due to present the budget today, faces the task of narrowing the widest fiscal gap in major emerging nations to boost the central bank’s scope to reduce interest rates and avert a ratings downgrade.
“The FM knows India can’t afford a ratings downgrade and therefore we expect fiscal numbers in the budget to come out well, which the markets will like,” Mehraboon Jamshed Irani, principal and head of private client group at Nirmal Bang Securities in Mumbai, told Bloomberg TV India yesterday.
The government will probably contain the budget deficit at about 5.3% of gross domestic product this fiscal year, the survey said. Chidambaram, presenting the government’s last full budget ahead of a general election due by 2014, has vowed to pare the fiscal gap to 4.8% of GDP in 2013-2014, from 5.3% this year.
Larsen advanced 3.2% to Rs1,409.65, the most since September 21. ICICI Bank rose 1.8% to Rs1,083.15, the most since January 14. ITC gained 1.4% to Rs294.8, the sharpest advance since January 29. Reliance gained 1% to Rs831.3, ending a two-day drop. Bharti Airtel, India’s largest cell-phone company, surged 3.2%.
The Sensex has fallen 4.7% from a two-year high set on January 25 as net incomes at 43% of the 30 index members missed estimates in the December quarter, up from 40% in the previous two quarters, data compiled by Bloomberg show. Net outflows from mutual funds for eighth straight months through January contributed to the weakness in share prices.
The government has stepped up efforts to revive an economy growing at the weakest pace in a decade and cool inflation of almost 7% under policy changes since September. GDP may climb 6.1% to 6.7% in the year ending March 2014, from an estimated 5% in 2012-2013, the survey said. The expansion this fiscal year would be the slowest since 2002-2003.
The policy measures have prompted overseas funds to buy a net $8.3bn of local equities this year, a record for the period, data compiled by Bloomberg show. They purchased $24.5bn worth of stocks last year, the highest among 10 Asian markets tracked by Bloomberg, excluding China.
The Sensex is valued at 13.5 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s 10.2 times, data compiled by Bloomberg show.
The CNX Nifty Index of the National Stock Exchange rose 0.6% to 5,796.90. India VIX, which measures the cost of protection against losses in the Nifty, fell 6.5%.
Meanwhile, India’s rupee rose to the highest level in more than two weeks on speculation Chidambaram will announce steps to pare the fiscal deficit when he presents the annual budget today.
The government will aim to narrow the widest gap among major emerging markets to 4.8% of gross domestic product in the year through March 2014 from an estimated 5.3% this year, according to research notes from Goldman Sachs Group and Credit Suisse Group. Overseas investors bought $49mn more Indian stocks than they sold on Feb. 25, taking inflows this year to $8.3bn, exchange data show.
“In all likelihood, it is going to be the most austere budget in recent years as the focus of the government remains on managing its fiscal and current-account deficits and reviving inward investment flows,” said Tim Fox, group head of research and chief economist at Emirates NBD in Dubai, the biggest United Arab Emirates bank by assets. The budget announcement will be a “catalyst” for the rupee to strengthen, he said.
The Indian currency advanced 0.4% to 53.8750 per dollar in Mumbai, according to data compiled by Bloomberg. It touched 53.6250 earlier, the strongest level since February 11. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, was unchanged at 9.50%.
India will probably contain the budget deficit at about 5.3% of gross domestic product this fiscal year as it tries to slow inflation, and economic growth is set to recover, Finance Ministry advisers said.
“The government is committed to fiscal consolidation,” they said in a report in New Delhi yesterday, predicting GDP will rise as much as 6.7% in the year through March 2014.
The shortfall in India’s current account, the broadest measure of trade, is expected to be “significantly higher” this fiscal year than the previous period’s record 4.2% of GDP, Reserve Bank of India Governor Duvvuri Subbarao said February 11.
Three-month onshore rupee forwards traded at 54.99 per dollar, compared with 55.22 Tuesday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 54.86 versus 55.14. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
Asia marts up on Fed stand; strong yen hits Tokyo
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Asian markets mostly rose yesterday after US Federal Reserve head Ben Bernanke reaffirmed the central bank’s huge monetary easing scheme, but a stronger yen sent Tokyo lower.
Investors remained hesitant and the euro came under pressure after Italy’s election results which left no party in overall control, raising concerns that uncertainty in Rome could see the eurozone return to the dark days of crisis.
Tokyo closed down 1.27%, or 144.84 points, at 11,253.97, Sydney was up 0.66%, or 33 points, at 5036.6, and Seoul rose 0.2%, or 4.03 points, to 2,004.04.
Shanghai closed up 0.87%, or 19.88 points, at 2,313.22, while Hong Kong finished 0.25% stronger, adding 57.32 points to 22,577.01.
In testimony to Congress Bernanke said the Fed’s $85bn a month bond-purchase programme aimed at holding down long-term interest rates and encouraging investment — known as quantitative easing — was still merited.
While warning that looming steep budget cuts could slow growth, he stressed high unemployment was a main challenge to the economy, adding that the risks of the programme — inflation, and risky behaviour in the financial industry — were being monitored closely.
The dollar fell against the yen, buying ¥91.64 in early European trade from ¥91.93 late Tuesday in New York, and well off the ¥94.77 high seen on Monday.
The European single currency bought $1.3082 and ¥119.89, from $1.3061 and ¥120.08.
Oil prices were mixed, with New York’s main contract, light sweet crude for delivery in April, rising 13¢ to $92.76 while Brent North Sea crude for April delivery fell six cents to $112.65.
Gold was at $1,608.32 at 1025 GMT compared with $1,597.80 late Tuesday.
In other markets, Wellington rose 0.88%, or 37.40 points, to close at a five-year high 4,276.32; Manila closed 0.22% lower, shedding 14.40 points to 6,616.27; Taipei rose 0.22%, or 17.08 points, to 7,897.98; Singapore rose 0.21%, or 6.86 points, to close at 3,261.12; Bangkok slipped 0.8%, or 12.27 points, to 1,518.05; Jakarta ended up 1.14%, or 53.38 points, at 4,716.42; and Kuala Lumpur shares ended flat at 1,624.14.