Sensex, Nifty rise amid bets on dovish RBI governor; ICICI Bank, Tata Steel surge2 min read . Updated: 12 Jul 2016, 07:27 PM IST
The S&P BSE Sensex closes 0.66%, or 181.45 points, higher at 27,808.14, while the Nifty 50 closes 0.63%, or 53.15 points, higher at 8,521.05
Mumbai: Indian stocks extended gains after entering a bull market as lenders and metal producers advanced amid speculation the next central bank governor may ease monetary policy.
ICICI Bank Ltd, State Bank of India and Axis Bank Ltd were among the biggest gainers on the S&P BSE Sensex and sent a gauge of lenders to its highest level in 11 months. Tata Steel Ltd rallied to more than a one-month high and Maruti Suzuki India Ltd, the largest car maker, jumped to its highest price in six months. Yields on bonds due in January 2026 are headed for the lowest close for benchmark 10-year debt since June 2013.
The Sensex climbed 0.66%, or 181.45 points, to 27,808.14, at close in Mumbai, extending Monday’s 1.8% gain that sent the gauge back into a bull market.
The Nifty 50 index of the national stock Exchange of India Ltd closed 0.63%, or 53.15 points, higher at 8,521.05.
India is due to announce a successor to central bank governor Raghuram Rajan as early as Tuesday, and the rally may continue if the new chief make its easier for companies to refinance expensive debt, investors said.
“The next governor is very likely to be a pro-growth oriented person," Vikas Gupta, an executive vice-president at Arthveda Fund Management Pvt. in Mumbai, said by phone. “The government has been talking about cutting rates on deposits as well as lending. They will keep in mind the candidate’s views on borrowing costs while selecting."
Banks have reported record losses as delinquent loans surged under a Rajan-led clean up, leading to allegations that his rigid rules and focus on inflation were stifling investment. The new governor may refrain from fresh asset reviews after the current one ends in March 2017, according to Nikhil Johri, chief investment officer at Trivantage Capital Management India Pvt. Ltd in Mumbai.
Rajan took charge of the central bank in 2013, when the rupee hit a record low and the inflation rate was among Asia’s fastest. After tight monetary policy and a crash in global oil prices helped damp price pressures, he began cutting borrowing costs last year and brought the benchmark rate to a five-year low of 6.5%.
The Sensex has rebounded 20% from a low reached in February amid forecasts for above-normal monsoon after back-to-back droughts and a recovery in company earnings. The rally has pushed up the index’s valuation to 16.6 times projected 12-months profits, versus a five-year average of 14.3 and a multiple of 12.1 for the MSCI Emerging Markets Index, data compiled by Bloomberg show.
“The market will consolidate at the current level as the rally has been superb," R.K. Gupta, managing director of Taurus Asset Management Co., which oversees $590 million, said from New Delhi. “The gains have come on the hope of a good monsoon, better earnings and the GST bill getting passed in the monsoon session of Parliament. We might see a correction if any of these variables don’t work out."
The government will succeed in passing the Goods and Services Tax Bill in the Parliament session due to start 18 July, ANI reported Monday citing transport minister Nitin Gadkari. Bloomberg