BLBG:Sensex Index Gains as Declining Crude Oil Price Eases Inflation Concerns
Indian stocks climbed for the first time in five days as oil prices dropped, easing concerns rising energy costs will undermine efforts to curb inflation and lower interest rates.
Reliance Industries Ltd. (RIL), operator of the world’s largest oil-refining complex, added 1.7 percent. Tata Motors Ltd. (TTMT), the largest truckmaker and owner of Jaguar Land Rover, rose for the first time in eight days. State Bank of India, the country’s biggest lender, gained the most in a month.
The BSE India Sensitive Index (SENSEX), or Sensex, advanced 1.7 percent to 17,744.2 at 12:12 p.m. in Mumbai, ending a four-day 5.3 percent decline. Oil dropped for a second day today, losing as much as 0.6 percent to $107.89 a barrel, potentially cutting costs for companies in India, which imports three-quarters of its oil. Foreigners (FIINNET) poured a record $1.55 billion into local shares on Feb. 24, taking total investments this year to $7.1 billion, according to the market regulator.
“A high oil price would be a negative for India in the long term, but as long as it doesn’t exceed $130, it shouldn’t have too significant an impact on the budget deficit and inflation numbers,” Khiem Do, Hong Kong-based head of multi- asset strategy at Baring Asset Management Ltd., which oversees $46 billion, said by phone today.
The Sensex had its first weekly loss in eight last week on concern oil-price increases may stoke inflation and prevent the Reserve Bank of India from easing policy. Consumer prices rose 7.65 percent in January from a year earlier, exceeding the 6.55 percent advance in the benchmark wholesale-price index.
‘Quite Positive’
The rate cycle has peaked, RBI Deputy Governor Subir Gokarn said on Feb. 14 after data showed inflation eased in January to the lowest in more than two years.
“India has started to ease monetary policy, that’s quite positive,” Barings’s Khiem Do said. “The headline inflation rate has been falling. India has lots of stocks which could be considered growth stocks, given the favorable demographics.”
The Sensex has advanced 15 percent this year as overseas funds poured money into Indian shares after inflation slowed and the rupee rallied from a record low even as company profit growth slowed. The measure trades at 15.7 times future profits, compared with 19.4 times at end of 2010. The MSCI Emerging Markets Index trades at 10.7 times.
The S&P CNX Nifty (NIFTY) Index on the National Stock Exchange of India gained 1.9 percent to 5,379.35. The BSE 200 Index (BSE200) soared 2.2 percent to 2,182.73.
Reliance climbed 2.1 percent to 797.8 rupees. BP Plc (BP/) said it’s developing a new plan with partner Reliance, operator of the country’s biggest natural gas deposit, to develop discoveries in the area simultaneously instead of in phases.
Tata Motors, the maker of the world’s cheapest car, the Nano, jumped 5 percent to 272.9 rupees, extending this year’s rally to 53 percent, the most among the Sensex companies. State Bank rallied 4.3 percent to 2,215 rupees. ICICI Bank Ltd. (ICICIBC), the second-biggest lender, rose 2.9 percent to 912.7 rupees.
Profit growth of companies in the Sensex index fell to 4.3 percent in the final three months of 2011, trailing analysts’ estimates. The government predicted Feb. 7 that economic growth in the year ending March will probably slow to 6.9 percent, the weakest pace since 2009, from 8.4 percent a year earlier.
To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
