Mumbai: India’s benchmark stock index rose on Tuesday to its highest level in a week as inflation slowed to an 11-month low, giving the central bank room to this week pause Asia’s fastest round of interest-rate increases.
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Sterlite Industries India Ltd, the nation’s biggest copper producer, rallied 3.4% after the nation’s top court allowed it to continue operating its smelter in Tamil Nadu until the next hearing.
Tata Steel Ltd climbed to a two-month high after saying it will raise prices for some European products as demand improves.
Wholesale prices rose 7.48% in November from a year earlier, the commerce ministry said on Tuesday.
“Slowing inflation certainly boosts investor confidence,” said Kishor Ostwal, managing director of CNI Research Ltd, a publicly traded equities research provider in Mumbai. “Companies can now expect the central bank to focus more on easing a cash crunch so that they can raise funds for expansion.”
The Bombay Stock Exchange’s sensitive index, or Sensex, advanced 107.41, or 0.6%, to 19,799.19 points at close in Mumbai.
Companies on the gauge are valued at an average 18.8 times estimated earnings, compared with a recent peak of 20.1 times on 5 November.
The S&P CNX Nifty Index on the National Stock Exchange added 0.6% to 5,944.10. The BSE 200 Index increased 0.7% to 2,468.25.
Sterlite advanced 3.4% to Rs170.6, its highest close in a week. The case will be heard in the last week of January next year, the court had said in its ruling on Monday.
Tata Steel climbed 2.5% to Rs646.6, its best close in two months.
Prices for plate and wire rod in Europe will be increased from 1 January, it said on Monday.
Larsen and Toubro Ltd, the nation’s biggest engineering company, gained 1.9% to Rs1,999.85, the most in two weeks. Reliance Infrastructure Ltd, builder of a mass rapid transit system in Mumbai, rose 2.6% to Rs832.3.
Reserve Bank of India policy makers meet on 16 December. The benchmark repurchase rate is at 6.25% after six increases since March to cool inflation.
Governor D. Subbarao said 9 December he is deeply conscious of the shortage of cash in the banking system. The central bank has injected an average Rs81,800 crore ($18.2 billion) each day into banks this quarter, the most since 2000, according to data compiled by Bloomberg.
The amount the lenders borrowed is an indication of the shortage of funds in the financial system.
“We expect RBI to maintain a pause in the near term, given significant tightness in the liquidity situation,” said Nischal Maheshwari, head of research at Mumbai-based Edelweiss Securities Ltd.
Hero Honda Motors Ltd, India’s largest motorcycle maker, declined 3.5% to Rs1,712.75, its lowest level since 8 September. Hero Group’s Munjal family will buy out Honda Motor Co.’s 26% holding in Hero Honda Motors Ltd for about $1 billion (Rs4,501 crore) The Economic Times newspaper reported, citing people it didn’t identify.
The offer values the company at about half of its market capitalization based on Monday’s closing price, according to calculations by Bloomberg.
Pawan Kant Munjal, the managing director of Hero Honda, didn’t answer calls to his cell phone.
Foreign funds have been net sellers of Indian stocks for four consecutive days, the longest stretch since 26 May.
Overseas investors sold a net Rs966 crore of Indian shares on 10 December, paring this year’s record inflows in equity to Rs1.3 trillion, according to data on the website of the Securities and Exchange Board of India.