Mumbai: The Bombay Stock Exchange’s (BSE) key index rose to the highest in a month on Monday, led by ICICI Bank Ltd and other lenders after the government forecast the economy will expand more than economists predicted and the central bank suggested interest rates may drop.
ICICI Bank rose 5.2%, its highest in three weeks. HDFC Bank Ltd added 2.3%. Housing Development Finance Corp. Ltd (HDFC) added 5.7%, its biggest gain in two months.
“We may see one more interest rate cut before March,” said Shashank Khade, who helps manage $400 million (nearly Rs1,950 crore) at Kotak Securities Ltd in Mumbai.
The Sensex rose 283.03 points, or 3%, to 9,583.89, the highest since 7 January. The S&P CNX Nifty index on the National Stock Exchange (NSE) advanced 76.80 points, or 2.7%, to 2,919.90.
Central bank governor D. Subbarao said on Sunday that there’s room to adjust interest rates further to spur the economy. Borrowing costs were left unchanged at the bank’s 27 January meeting, after they were lowered to a record in early January to shield India from the global slump.
ICICI gained 5.2% to Rs428.35, its highest since 14 January. HDFC Bank added 2.3% to Rs919.45. HDFC rose 5.7% to Rs1,492.05, the most since 10 December. The share prices are composite of BSE and NSE rates.
India’s economy may grow at the slowest pace since 2003 this year, probably expanding 7.1% in the year ending 31 March, the statistics office said in a statement in New Delhi on Monday. The median forecast of 24 economists in a Bloomberg survey was for a 6.8% gain.
“We do have room for interest rate adjustments and we will make all adjustments as deemed appropriate,” Subbarao said at an event organized by the Malaysian central bank. He didn’t elaborate further.
The economy will have a more difficult year in the 12 months ending March 2010, compared with expected growth of 7% in the current period, Subbarao told reporters in Kuala Lumpur.
Oil and Natural Gas Corp. Ltd added Rs41.15, or 6%, to Rs724.40 after the stock was raised to “outperform” from “neutral” at Credit Suisse Group.
Tata Steel Ltd gained Rs13.15, or 7.1%, to Rs199.65, the most since 10 December. The company said January sales increased 26% because of a rebound in demand.