Indian stocks rise fourth day as lenders, auto stocks advance

Bloomberg/Mumbai

India’s benchmark stock index rose for a fourth day to reach a six-week high, led by financial and auto companies on speculation interest rates will decline.

The S&P BSE Sensex advanced 1.2% to 19,406.85 at the close in Mumbai, its highest level since March 15. The market was closed Wednesday for a holiday. Housing Development Finance Corp, India’s top mortgage lender, climbed 2.9%. ICICI Bank, the largest private lender, gained for an 11th day, its longest winning streak since 2005. Tata Motors jumped 4.2%, leading gains among automakers.

Indian shares have rallied since plunging to a seven-month low earlier this month as slowing wholesale-price inflation and falling prices of gold and oil prompted speculation the Reserve Bank of India will lower rates next week. The RBI may cut its key rate by 25 basis points at a May 3 review, according to 18 of 22 economists surveyed by Bloomberg. Three forecast no change, while one expects a 50 basis point reduction.

“The central bank is likely to cut interest rates more aggressively,” Pratik Gupta, head of equities at Deutsche Equities India, told Bloomberg TV India in an interview yesterday. “The fall in gold and oil prices paves the way for more rate cuts.”

HDFC climbed 2.9% to Rs862.75, its highest close since December 11. ICICI Bank jumped 1.4% to Rs1,177.35, the longest stretch of gains since September 20, 2005. It is due to report earnings today. State Bank of India gained 2.1% to Rs2,334.55.

Tata Motors, owner of British luxury car brands Jaguar and Land Rover, rallied 4.2% to Rs293.3, its highest close since March 14. Maruti Suzuki India, the nation’s largest carmaker, rose 3.6% to Rs1,590.95, and motorcycle maker Hero Motocorp jumped 2.8% to Rs1,617.75. Maruti and Hero are scheduled to report results today. Jindal Steel & Power, India’s second-biggest maker of the alloy, posted fourth-quarter group profit of Rs7.6bn, missing the Rs9.7bn median estimate in a Bloomberg survey of 18 analysts. The stock slid 0.2% to close at Rs329.2 before the results were declared.

Net income at one of the six Sensex companies that have reported March-quarter results so far has missed analyst estimates. Profits at about 43% of the 30 index companies trailed forecasts in the three months ended December 31, compared with 40% in the previous two quarters.

Jet Airways (India), which is not a Sensex member, surged 11% to Rs634.80, the highest close since January 2011. Etihad Airways agreed to buy a 24% stake in the Indian carrier for Rs20.6bn. Etihad will purchase 27.26mn shares at Rs754.74 apiece, 32% higher than the closing price on April 23, Jet said in an exchange filing Wednesday.

Drugmaker Dr Reddy’s Laboratories rallied 4.8% to a record Rs1,992.50. Sun Pharmaceutical Industries, the nation’s most valuable drugmaker, climbed 3.1% to a record Rs979.6.

“We believe that a majority of the pharma companies will report strong fourth-quarter results, both on the topline and the bottom-line,” First Global Securities wrote in a report dated April 23. The brokerage cited “strong” sales in the US, higher capacity utilisation and an increase in revenue from emerging markets among reasons.

Foreign funds bought a net $83.6mn of Indian shares on April 23, taking their net investment in stocks this year to $10.69bn, data compiled by Bloomberg show. Funds bought a net $292.1mn worth of equities last week, the most in five weeks. That helped the Sensex rally 4.2%, the most since the week ended November 30.

The gauge is valued at 13.1 times projected 12-month profits, compared with a multiple of 10.4 times for the MSCI Emerging Markets Index. India’s inflation slowed to a 40-month low of 5.96% in March, government data showed April 15. A current-account deficit that widened to a record $32.6bn in the December quarter, along with elevated prices, has deterred the RBI from further reducing borrowing costs after 25 basis-point cuts in January and March.

The 50-stock CNX Nifty Index on the National Stock Exchange of India jumped 1.4% to 5,916.30 while its April futures, which expired yesterday, settled at 5,917.30. India VIX, which measures the cost of protection against losses in Nifty, slumped 5.8% to 14.20.

Meanwhile, India’s rupee rose from a one-week low on speculation global policy makers will lower borrowing costs to support growth, boosting purchases of local equities.

The Reserve Bank of India will cut its repurchase rate to 7.25% from 7.5% at a May 3 review, 17 of 19 economists predict in a Bloomberg News survey. The European Central Bank may reduce rates on May 2, according to another survey, after manufacturing and services activity for April underscored weakness in output.

Disappointing economic data “has raised expectations of a rate cut by the ECB,” analysts at Edelweiss Financial Advisors, including Mumbai-based Vinay Khattar, wrote in a report yesterday. “Month-end dollar demand is keeping gains in the rupee limited, but a strong domestic equity market is proving to be supportive.”

The rupee advanced 0.3% to 54.225 per dollar in Mumbai, according to data compiled by Bloomberg. It touched 54.43 on April 23, the weakest level since April 16. The market was shut Wednesday for a local holiday. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 37 basis points, or 0.37 percentage point, to 8.25%.

Germany’s Ifo index of business confidence fell more than economists predicted, the institute said Wednesday. The euro- area composite purchasing managers’ index of manufacturing and services remained at 46.5 in April, Markit Economics said April 23. That’s below the 50 mark that divides contraction from expansion.

Three-month onshore rupee forwards traded at 55.18 per dollar, compared with 55.33 Wednesday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 54.95 versus 55.13. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.