Indian stocks rose, capping a second weekly advance for the benchmark index, on speculation central banks in India, Europe and the U.S. may act to boost economies amid faltering growth and as local companies paid higher taxes.
Tata Motors Ltd. (TTMT), India’s biggest automaker, surged 6 percent after Chairman Ratan Tata bought the company’s shares and sales at its Jaguar Land Rover unit rose more than analysts estimated. Asian stocks climbed as the stimulus optimism countered concerns Europe’s debt crisis will worsen. Hindustan Unilever Ltd. (HUVR), the Indian unit of the world’s second-largest consumer goods company, climbed 2 percent to a record.
The BSE India Sensitive Index (SENSEX), or Sensex, jumped 1.6 percent to 16,949.83 at close. The gauge rose 1.4 percent this week. Bank of England Governor Mervyn King said yesterday the case for looser policy is “growing,” while U.S. economic data may support the case for further stimulus from the Federal Reserve, which meets for two days from June 19.
“Global optimism drove Indian equities after we saw a good correction yesterday,” said Anita Gandhi, a director at Arihant Capital Markets Ltd. in Mumbai. “Markets believe the Reserve Bank of India will certainly ease monetary policy. The question is what would be the quantum of easing.”
The RBI may lower rates for a second time this year at its policy review on June 18 amid the slowest economic expansion in nine years, economists say, even as data yesterday showed wholesale prices accelerated for a second month in May.
Interest-rate Outlook
The central bank will cut a key rate by 25 basis points to 7.75 percent, according to 19 of 25 economists in a Bloomberg survey. Four predict the central bank will leave the rate unchanged and two forecast a 50-basis-point cut.
China cut borrowing costs on June 7 for the first time in more than three years, two days after Australia reduced rates.
India’s inflation quickened a faster-than-estimated 7.55 percent, after rising 7.23 percent in April. The median of 37 forecasts in a Bloomberg survey was for a 7.5 percent gain. A separate report showed a drop in exports and imports last month.
Economic expansion in the first quarter was the weakest in almost a decade as a policy gridlock in the ruling coalition undermined Prime Minister Manmohan Singh’s efforts to revive the economy and the debt crisis in Europe, India’s top trading partner, crimped exports. Government data earlier this week showed factory output grew less than analysts estimated in April, adding to the case for a rate cut.
The MSCI Asia Pacific Index (MXAP) climbed 1 percent at 4:44 p.m. in Mumbai today. European stocks advanced for the first time in three days, with the Stoxx Europe 600 Index (SXXP) gaining 1.1 percent.
Greek Vote
On June 17, almost 10 million Greeks will vote for the second time in six weeks after a May 6 ballot failed to result in a government. The constitution permits a third election too. Exit polls will be released when voting ends at 7 p.m.
The Sensex rallied 4.7 percent last week, its best weekly advance this year, amid speculation the RBI would ease monetary policy. The gauge has climbed 9.7 percent this year and trades at 13.3 times estimated earnings. The MSCI Emerging Markets Index (MXEF) trades at 10 times.
Tata Motors surged 6 percent to 240.3 rupees, the biggest rally in four months. The company reported deliveries at its British luxury-automobile unit increased 35 percent to 30,094 vehicles in May, exceeding the 28,175 average estimate of 11 analysts surveyed by Bloomberg. Ratan Tata bought 425,000 shares at 233.87 rupees apiece yesterday, the company said in a separate stock exchange filing.
Advance Tax
Hindustan Unilever climbed 2 percent to a record 449.45 rupees. The company is paying 1.4 billion rupees of tax for the quarter ending June, compared with 950 million rupees last year, said a deputy commissioner at Mumbai’s income tax department, who declined to be identified citing rules.
Companies pay tax in advance based on their estimated income for the year, a measure monitored by investors as an indicator of profitability.
ICICI Bank Ltd. (ICICIBC), the second-largest lender, jumped 3.3 percent to 845.70 rupees, the most since May 25. The bank increased advance-tax payment 25 percent, the official said. HDFC Bank Ltd. (HDFCB) advanced 2.5 percent to 547.55 rupees.
Coal India Ltd. (COAL), the world’s largest producer of the fuel, rallied 2.6 percent to 339.70 rupees, the most since April 26, and Larsen & Toubro, India’s largest engineering company, gained 2.1 percent to 1,323.75 rupees.
India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index, slid 0.7 percent to 25.54. The Nifty jumped 1.7 percent to 5,139.05 while its June futures settled at 5,147.70. The BSE-200 Index (BSE200) rose 1.5 percent to 2,074.76. Combined trading volume on India’s top two exchanges was 690.65 million shares yesterday, compared with a 12-month daily average of 906.39 million.
Overseas investors were net buyers of local shares for a sixth straight day on June 13, purchasing a net $49 million of stocks and taking their total investment this year to $8.56 billion, data from the regulator show. They cut holdings by $273 million in May, a second consecutive month of net sales.
To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
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