Sensex edges higher ahead of key retail inflation data

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex edged higher on Tuesday as rate-sensitive stocks such as ICICI Bank rose on hopes lower retail inflation data would lead to early interest rate cuts, although profit-taking prevented the indexes from hitting further record highs.

Meanwhile, non-banking finance companies like Housing Development Finance Corporation also rose after the central bank unveiled rules on bad loans and capital requirements that came largely along expected lines.

Traders say volumes will remain muted until India releases data on Wednesday on retail inflation, which is expected to slow to a record low of 5.80 percent in October, according to a Reuters poll.

That is expected to intensify calls for an interest rate cut by the Reserve Bank of India at its next policy review on Dec. 2.

"Market is discounting a fall in inflation and a resultant decrease in interest rates," said Deven Choksey, managing director at K R Choksey Securities.

The Sensex rose 0.13 percent to end at 27,910.06.

The broader NSE Nifty rose 0.22 percent to end at 8,362.65, also marking a record closing high.

Rate-sensitive stocks led the gains on hopes lower retail inflation data would enable the RBI to go for early rate cuts.

ICICI Bank ended up 1.6 percent while HDFC Bank gained 0.4 percent.

Among state-run banks, Bank of Baroda rose 2.7 percent while Punjab National Bank advanced 3.4 percent.

Some auto stocks gained with Mahindra and Mahindra rising 2.4 percent while Larsen and Toubro gained 1.1 percent.

Non-banking finance companies also rose. India raised the minimum capital requirement for so-called shadow banks and tightened rules on deposits and bad loans on Monday, but the rules were largely within expectations.

Housing Development Finance Corporation gained 1.2 percent, while IDFC ended 2.7 percent higher.

Shriram Transport gained 4.9 percent, Mahindra and Mahindra Financial Services rose 1.1 percent.

However, among decliners, Jet Airways fell 2.5 percent on profit-taking after Monday's 6.9 percent surge after September-quarter results.

(Editing by Sunil Nair)