Rate cut speculation boosts stocks

Hopes of a rate cut and further measures to prop up the economy pushed up markets.

Indian stocks rose, snapping a two-day decline, as ICICI Bank led financial companies higher on expectation the central bank may cut interest rates to boost economic growth. ICICI Bank, the country’s second-largest lender, climbed 3.1 per cent to Rs 434.40 after the government said it will continue efforts to stimulate lending and bolster growth, prompting speculation that borrowing costs will be lowered to revive the economy after industrial output dropped the most in 16 years.

SBI added 3.2 per cent to its highest close in a month, and HDFC Bank added 1.1 percent. “We expect a 50 to 100 basis point cut in rates by April,” said Navneet Munot, who oversees $5.5 billion as chief investment officer at SBI Asset Management Co. in Mumbai.

The BSE Sensex advanced 168.91 points, or 1.8 percent, to 9,634.74. The index gained 3.6 percent this week. The S&P CNX Nifty added 55.30 points, or 1.9 per cent to 2,948.35. The BSE 200 gained 1.7 per cent to 1,133.73. Nifty futures for February delivery rose 1.7 per cent to 2,935.70.

The government will continue efforts to stimulate bank lending and bolster growth, Trade Minister Kamal Nath said. Separately, Suresh Tendulkar, chairman of prime minister’s Economic Advisory Council, said that an interest rate cut was “desirable” to stimulate economic growth.

Commodity producers
Inflation slowed to a one-year low, prompting speculation that borrowing costs will be lowered. Wholesale prices climbed 4.39 per cent in the last week of January from a year earlier. Economists expected an increase of 4.41 percent.

Tata Steel led commodity producers higher on optimism that China’s economy is showing signs that a 4 trillion yuan ($585 billion) stimulus package is taking effect. The world’s third- biggest economy may expand 6.6 percent in the second quarter after slowing to 6.3 percent in the three months to March 31, according to the median estimates of 14 economists surveyed by Bloomberg News. China is the world’s biggest consumer of industrial metals including steel, copper and aluminum. Overseas investors sold a net Rs 1.14 billion rupees ($23.4 million) of Indian stocks on February 11, according to the nation’s market regulator.

The author is a Bloomberg News columnist. The opinions expressed are her own