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India Stocks Gain as Lower Inflation Kindles Rate Cut Hopes

Stock MarketsJan 14, 2019 11:30PM ET
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© Bloomberg. An electronic ticker board displays stock figures outside the Bombay Stock Exchange (BSE) building in Mumbai, India, on Tuesday, Dec. 11, 2018. India’s new central bank governor has a list of challenges to face as he takes office: from fixing a banking crisis to convincing investors of the institution’s autonomy.

(Bloomberg) -- India stocks rose, joining peers across Asia, as inflation in December eased to an 18-month low, increasing the odds that the central bank may reduce rates helping revive demand and lower the cost of borrowing for companies.

The S&P BSE Sensex advanced 0.8 percent to 36,139.97 at 9:33 a.m. in Mumbai, snapping three sessions of decline. The broader NSE Nifty 50 Index climbed 0.8 percent.

Consumer prices rose 2.19 percent in December from a year earlier, in the third straight month of moderation, the Statistics Ministry said in a statement on Monday. This is the final price print before the central bank’s Monetary Policy Committee meets next month to decide on rates. Earlier, data showed factory output rose 0.5 percent in November, sharply lower than the 8.4 percent gain in the previous month.

The Numbers

  • All 19 sub-indexes compiled by BSE Ltd. gained, led by measures of energy companies and software exporters
  • Maruti Suzuki India Ltd. and Bajaj Finance Ltd. gave the biggest boosts to the benchmark index
  • Yes Bank Ltd. surged as much as 3.6% and was the top performer on the benchmark gauge

Strategist View

  • “Lower inflation was expected given the sharp decline in crude oil and food prices,” said Sameer Kalra, president research at Target (NYSE:TGT) Investing in Mumbai. “However, crude remains volatile and may lead the Reserve Bank of India to pause and look at data for another quarter before reducing rates. Though it is likely to keep an easing stance with respect to liquidity.”
  • “Earnings for companies so far is showing revenue growth led by volumes even as margins are contracting. The trend is likely to persist for a couple of quarters before the companies regain pricing power and margins improve,” he says.

India Stocks Gain as Lower Inflation Kindles Rate Cut Hopes

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