Markets gain; RBI seen cutting rates

Mumbai: Main indexes edged higher on Monday led by rate-sensitive stocks such as State Bank of India after data showing easing inflation cemented hopes for the first rate cut in three years. The central bank’s meeting on Tuesday is shaping up as a critical test for Indian markets, as investors clamor for growth-boosting measures, especially at a time when doubts are emerging about a slowdown in foreign purchases of equities. Wholesale price index (WPI), rose 6.89% in March from a year ago, a little above expectations but still lower than the 6.95% rise seen in February. Traders focused particularly on the manufacturing goods inflation, which is believed to be key to the RBI’s decision making. That sub-index dropped to 4.87% last month from 5.75% in February. Analysts polled by Reuters expect a 25 basis points cut in the repo rate, and some also expect a joint cut in the cash reserve ratio, or the proportion of deposits that banks must keep with the central. “Manufacturing inflation below 5% after a long time advocates a rate cut” said Aneesh Srivastava, CIO of IDBI Federal Life Insurance, who manages 12.5 billion rupees in Indian equities “My expectations are there would be a CRR cut as well,” he added. The country’s main 30-share BSE index ended up 0.33% at 17150.95 points while the 50-share NSE index rose 0.36% at 5226.20 points. Lenders were among the leading gainers, since a simultaneous cut in the CRR would inject liquidity into a sector facing a shortage of funds. Shares in State Bank of India rose 2.4% while private lender Axis Bank added 3%. Auto makers and two-wheelers also advanced on hopes lower borrowing costs would boost demand from consumers. Hero Motocorp and Bajaj Auto ended 0.6% up. Tata Motors ended 3.91% up after saying its global vehicle sales rose 26% in March from a year earlier, driven in part by strong sales of its luxury Jaguar Land Rover vehicles. Infrastructure stocks also rose, with Punj Lloyd and IRB Infrastructure each gaining 1.6% as higher interest rates have dented the companies balance sheets in recent months. However, among decliners, Infosys lost 1.6%, extending losses from a 13% plunge on Friday after a slew of analysts downgraded the stock following its lower-than-expected revenue growth outlook. Reliance Industries fell 0.46%, as traders worry India’s biggest energy conglomerate will post weaker-than-expected earnings on Friday. Top-ranked analysts from StarMine forecast a fiscal fourth quarter net profit of Rs 4258 crore for Reliance, nearly 7% below the wider consensus forecasts.