Stocks climb 2nd day amid bets on dovish RBI head

ICICI, Axis Bank among the biggest gainers

Indian stocks extended gains after entering a bull market and sovereign bonds climbed the most since April amid speculation the next central bank governor may cut interest rates faster to bolster economic growth.

ICICI Bank and Axis Bank were among the biggest gainers on the S&P BSE Sensex and sent a gauge of lenders to an 11-month high. National Aluminium Co. surged the most in six and half years, helping an index of metalmakers to its steepest gain in three months, as Goldman Sachs Group Inc. raised price forecasts for most industrial metals through 2017.

The Sensex added 0.7 per cent at the close, extending its two-day gain to 2.5 per cent, the most since May 27. A successor to Reserve Bank of India Governor Raghuram Rajan may be named this week, and Arvind Panagariya, vice chairman of a government-established policy research group was the top contender for the job, Bloomberg TV India reported Monday.

 

Rajan, whose term ends September 4, was accused by a member of Prime Minister Narendra Modi's ruling party of keeping borrowing costs too high. "The next governor is very likely to be a pro-growth oriented person," Vikas Gupta, an executive vice president at Arthveda Fund Management in Mumbai, said by phone.

"The government has been talking about cutting rates on deposits as well as lending. They will keep in mind the candidate's views on borrowing costs while selecting."

The Sensex has rebounded 21 per cent from a low reached in February amid forecasts for above-normal monsoon after back-to-back droughts and a recovery in company earnings. The rally has pushed up the index's valuation to 16.7 times projected 12-month profits, versus a five-year average of 14.3.

(Bloomberg)