BS: Indian Stocks Climb to Record as Rupee Gains on Crude Decline
Indian stocks advanced to a record and the rupee climbed to the highest level since July after a decline in oil prices eased concern that inflation will quicken.
The S&P BSE Sensex (SENSEX) jumped 1.1 percent to 27,319.85 at the close, while the currency strengthened 0.2 percent to 60.2950 per dollar after touching 60.1975 earlier. The yield on the 8.4 percent sovereign bonds due July 2024 declined 2 basis points to 8.5 percent.
Brent crude dropped below $100 a barrel for the first time since June 2013, as a slowdown in imports into China reinforced signs that global markets are comfortably supplied. Lower fuel costs help ease price pressures in a country that buys about 80 percent of its oil from abroad, aiding Prime Minister Narendra Modi’s efforts to narrow the current-account gap that widened to a one-year high in the quarter ended June.
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“For India, cooling in oil prices is very good news,” Aneesh Srivastava, chief investment officer with IDBI Federal Life Insurance Co., said by phone from Mumbai.
While consumer-price gains have slowed to 7.96 percent in July from as much as 11.16 percent last November, the Reserve Bank of India’s target is to limit the pace of price increases to 8 percent or less by January 2015. The central bank left the key interest rate unchanged at 8 percent at an Aug. 5 review.
India’s current-account deficit widened to $7.8 billion in the three months ended June, compared with $1.2 billion in the previous period, data showed on Sept. 1. That amounts to 1.7 percent of gross domestic product. The RBI considers a deficit of 2.5 percent of GDP as sustainable.
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Refiners Rally
Oil & Natural Gas Corp. (ONGC), India’s largest state-owned oil explorer, climbed 2.6 percent to its highest level since June 6. Refiners Indian Oil Corp. and Hindustan Petroleum Corp. rose to their highest level since November 2010.
Ten-year government securities rallied the most in a week amid optimism the relatively higher yield on Indian assets will lure capital inflows as the Federal Reserve keeps its benchmark rate near zero. Last month’s 142,000 gain in U.S. non-farm payrolls was weaker than the lowest estimate in a Bloomberg News survey and followed a revised 212,000 increase in July, figures from the Labor Department showed Sept. 5.
The U.S. employment report is “reviving bets that the Federal Reserve might leave interest rates near zero for longer than anticipated,” analysts at Edelweiss Financial Services Ltd., including co-head of currency and rates Ankur Jhaveri in Mumbai, wrote in a note today.
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BlackRock Bullish
Foreigners have added a record $17.8 billion to holdings of local bonds in 2014 as investors including BlackRock Inc., the world’s largest asset manager, bet Modi’s government will bring stability to Indian markets. They’ve bought $13.6 billion of shares, the most among Asian markets tracked by Bloomberg.
The Sensex has advanced 29 percent this year, the best performance among the world’s 10 largest equity markets, and trades at 15.9 times projected 12-month earnings. That compares with the MSCI Emerging Markets Index’s multiple of 11.5.
One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, fell three basis points to 8.44 percent, the lowest in more than a month, data compiled by Bloomberg show.
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One-month implied volatility in the rupee, a measure of expected exchange-rate swings used to price options, fell five basis points to 6 percent, according to data compiled by Bloomberg. Three-month offshore non-deliverable forwards were unchanged at 61.12 per dollar. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in the U.S. currency.
To contact the reporters on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net; Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net; Michael Patterson at mpatterson10@bloomberg.net Ravil Shirodkar, Dick Schumacher
