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Indian stocks gain on global stimulus speculation

Markets gains on stimulus expectations

Gulf News

Mumbai Indian stocks rose, capping a second weekly gain, on speculation central banks in India, Europe and the US may act to stimulate economies amid faltering growth and as local companies paid higher taxes.

Tata Motors Ltd, India’s biggest car maker, surged six per cent after Chairman Ratan Tata bought the company’s shares and sales at its Jaguar Land Rover unit rose more than analysts estimated. Asian stocks gained as the stimulus optimism countered concerns Europe’s debt crisis will worsen. Hindustan Unilever Ltd, the Indian unit of the world’s second-largest consumer goods company, climbed 1.6 per cent to a record.

The BSE India Sensitive Index, or Sensex, jumped 1.6 per cent to 16,936.22, according to preliminary closing prices at 3.30pm in Mumbai. The gauge has risen 1.3 per cent this week. Bank of England Governor Mervyn King said on Thursday the case for looser policy is “growing,” while US economic data may support the case for further stimulus from the Federal Reserve, which meets for two days from June 19.

India’s central bank may cut rates for a second time this year at its policy meeting on June 18 amid the slowest economic growth in nine years, economists say, even as data yesterday showed wholesale prices accelerated for a second month in May.

Tata Motors surged six per cent to Rs240.3 (Dh15.9). Hindustan Unilever climbed two per cent to a record Rs449.45. The company is paying Rs1.4 billion of tax for the quarter ending June, compared with Rs950 million last year, said a deputy commissioner at Mumbai’s income tax department, who declined to be identified citing rules.


Extended drop

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.

India’s rupee extended this month’s drop during the week after inflation accelerated by more than economists estimated in May and as Standard & Poor’s warned the country may lose its investment-grade status.

Wholesale prices rose 7.55 per cent last month after climbing 7.23 per cent in April and compared with the median estimate of 7.5 per cent among analysts in a Bloomberg News survey, a government report showed on Thursday. Overseas investors cut holdings of Indian shares by $216 million in the past month, according to exchange data.

“India is facing the negative combination of fiscal slippage, high inflation, currency depreciation, and capital outflows,” analysts at Brown Brothers Harriman & Co, including New York-based Marc Chandler, head of global currency strategy, wrote in a research note to clients. “We think the rupee is particularly vulnerable due to weak fundamentals and should continue to underperform despite officials’ efforts.”

The rupee declined 0.5 per cent this week to 55.7050 per dollar as of 9.43am in Mumbai, according to data compiled by Bloomberg. The currency, which has dropped every week bar two since the start of March, advanced 0.2 per cent on Friday. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 11.95 per cent.

The Reserve Bank of India will lower its benchmark repurchase rate to 7.75 per cent from eight per cent at a review on June 18, according to 19 of 25 analysts in a Bloomberg News survey. Two expect a reduction to 7.5 per cent and four predict no change. Industrial production increased 0.1 per cent from a year earlier in April, official data showed this week, compared with the 1.7 per cent median estimate in a Bloomberg News survey.