(MENAFN- Gulf Times) Most Indian stocks advanced, led by lenders and industrials, amid speculation the Federal Reserve's decision to maintain its benchmark interest rates will pave the way for India's central bank to cut borrowing costs next week.
Axis Bank jumped to a one-month high, helping a gauge of lenders advance for a third day. Larsen & Toubro, the most valuable engineering company, rebounded after a three-day, 4.1% drop. Reliance Industries, owner of the world's largest refining complex, was the worst performer on the S&P BSE Sensex, while ITC decreased for a second day.
The S&P BSE 500 Index, a gauge of the broader market, capped a third day of gains, while a gauge of small and medium- sized companies climbed for a second day. The Sensex lost 0.1% to 26,192.98 at the close yesterday, paring an intra-day loss of 0.9%. India needs reduce rates, and the Reserve Bank of India must decide how much to cut, Finance Minister Arun Jaitley said in an interview with Bloomberg Television in Hong Kong.
"With the Fed leaving things unchanged and the way inflation has been trending down, the chances of a rate cut are high," Nitasha Shankar, vice president for equity research at Yes Securities in Mumbai, said in an interview with Bloomberg TV India yesterday. "The markets will remain volatile until the RBI meeting next week."
Governor Raghuram Rajan last month resisted pressure from the government to ease policy. He left the main rate unchanged at 7.25% at an Aug 4 meeting after three cuts in 2015 to meet his inflation target of 6% by January. The next review meeting is on September 29. Official data have shown that consumer price gains slowed to 3.66% in August as oil has tumbled below $50 a barrel and global food costs fell.
Axis Bank climbed 2% to its highest level since August 20. State Bank of India rose 1.3%, extending last week's 5.2% advance. ICICI Bank and HDFC Bank added at least 0.4%. All four banks were among the top 10 gainers on the Sensex.
Hindalco Industries, an aluminium producer, rallied 2.9% after falling as much as 2.2%. Maruti Suzuki India, the maker of half the cars sold in India, gained 2% in a sixth day of gains, while Larsen & Toubro rose 0.6%.
Reliance Industries lost 1.9%, halting last week's 4% gain. ITC fell 1.2% to a one-week low. Hindustan Unilever, India's biggest household products maker, dropped 0.9%.
Motherson Sumi Systems tumbled 7.7% to its lowest price in 11 months, tracking a rout in shares of Volkswagen. The German carmaker, the biggest contributor to Motherson's sales, lost a quarter of its market value after it admitted to cheating on US air pollution tests for years. Motherson said it is assessing the full impact of Volkswagen's admission on its future volumes.
Overseas investors bought a net $117mn of local shares on September 18, taking this year's inflows $4.1bn. Foreign funds unloaded $2.6bn of Indian shares in August, the worst outflow since October 2008.
The Sensex has fallen 4.8% this year and is valued at 14.9 times projected 12-month profits, data compiled by Bloomberg show.
Meanwhile the rupee fell from a one-month high as local stocks retreated and Federal Reserve officials argued that an increase in US interest rates is still warranted this year.
The rupee fell 0.1% to 65.7450 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It climbed 1.2% to 65.6750 on Friday, the highest level since August 20, after the Fed refrained from tightening policy citing global growth concern and turbulent financial markets. The S&P BSE Sensex index of Indian shares slid 0.1%, halting a two-day gain, as stocks across Asia declined after a sell-off in US equities Friday.
"The rupee is moving in tandem with stocks, which are down tracking global markets," said Rohan Lasrado, Mumbai-based head of foreign-exchange trading at RBL Bank. "There is a growing market consensus for Fed action in December."
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