Mumbai: Indian shares rebounded from the lowest level in two months after a drop in crude prices eased concerns that fuel prices will stoke inflation and as some investors judged declines as excessive.
Larsen and Toubro Ltd (L&T), the nation’s largest engineering company, advanced 1.75%. ICICI Bank Ltd, the country’s second biggest lender, rose 1.27%. Crude oil declined 2.4% on Monday in New York as Europe’s sovereign debt crisis deepened, bolstering concerns that economic growth in the region will slow, curbing consumption.
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The Bombay Stock Exchange (BSE) sensitive index, or Sensex, gained 18.64 points, or 0.1%, to 18,011.97. The gauge on Monday dropped to the lowest close since 22 March. The index swung between gains and losses at least 10 times during the day.
The environment has marginally improved for India as commodities prices have eased, said Aneesh Srivastava, who oversees about $355 million as chief investment officer at IDBI Federal Life Insurance Co. Ltd in Mumbai. Still riskier assets are underperforming as the outlook for easy liquidity remains unclear after June when quantitative easing comes to an end in the US. Not much optimism is building into the markets, he said.
The S&P CNX Nifty on the National Stock Exchange (NSE) rose 0.2% to 5,394.85 and its May futures settled at 5,393.90. The BSE-200 Index increased 0.2% to 2,226.40.
L&T climbed 1.75% to Rs1,641.10. ICICI Bank added 1.27% to Rs1,019.35.
Hero Honda Motors Ltd, the biggest motorcycle maker, rose 1.33% to Rs1,812.05 and its May futures settled at Rs1,807.25. Tata Steel Ltd, the biggest producer of the alloy, advanced 1.24% to Rs566.20.
The Sensex has fallen 12% this year, the biggest decline among benchmark indexes for the world’s 10 biggest markets, on concern higher borrowing costs will hurt corporate earnings. Stocks on the gauge trade at an average 14.4 times estimated profit, down from 21.5 times in March 2010, last year’s high. The MSCI Emerging Markets Index is valued at 11 times earnings.
The Sensex lost 1.1% last week after the biggest gasoline price increase since 2008 fanned concerns that inflation will accelerate and prompt the central bank to raise interest rates further. A panel of ministers will meet this week to decide on diesel prices, farm minister Sharad Pawar told reporters in New Delhi on Monday.
Valuation-wise, Indian markets are attractively priced, but the sustainability of 8%-plus growth and uncertainty on interest rates is stopping investors, IDBI Federal’s Srivastava said.
India’s central bank on 3 May raised rates for a ninth time since March 2010 to curb rising prices, and governor D. Subbarao predicted inflation will stay elevated until September.
Asian stocks will return just 2% to investors over the next three months amid duller economic and earnings prospects and higher energy prices, according to Goldman Sachs Group Inc.
Import costs for India, which buys almost three-quarters of the oil it uses from overseas, surged to a one-year high of $9.4 billion in March. The country’s Wholesale Price Index climbed 8.66% in April from a year earlier after an 8.98% advance in March, the trade ministry said on 16 May. By comparison, consumer prices rose 5.3% in China, 9.6% in Russia and 6.5% in Brazil.
Kingfisher Airlines Ltd, the nation’s second biggest airline, rose 2.36% to Rs41.15 after it narrowed its loss in the fiscal ended March 31, 2011, to Rs1,030 crore from Rs1,650 crore a year earlier.
Overseas investors sold a net Rs75.1 crore of Indian stocks on 20 May, taking total outflows from equities this year to Rs.2,980 crore, according to data updated on Monday on the website of the Securities and Exchange Board of India.