(BN) Indian Stocks Advance After BOJ as U.S. Fed Meeting Awaited

By Rajhkumar K Shaaw and Santanu Chakraborty (Bloomberg) — Indian stocks climbed, tracking gains in emerging-market equities, after the Bank of Japan adjusted its monetary stimulus program and as investors bet the U.S. Federal Reserve will not raise borrowing costs at its policy meeting later Wednesday.

A gauge of developing-nation equities climbed to the highest level in a week and Japan’s Topix index surged 2.7 percent. The BOJ said its monetary base target, which previously had been set at yearly gains of 80 trillion yen ($780 billion), may now swing as policy makers seek to control the yield curve.

The authority kept the interest rate on a share of bank reserves at negative 0.1 percent.

Index | Change | Level
Sensex | +0.4%| 28,637.43
Nifty 50 | +0.3%| 8,797.60
S&P BSE MidCap | +0.4%| 13,174.21

Investors are now focusing on the Federal Open Market Committee gathering in the U.S. All but four of 102 economists surveyed by Bloomberg predict the authority will hold off from raising rates after employers added fewer jobs than forecast in August and growth in services slowed.

“With low inflation, the Fed does not have a reason to hike rates except to normalize them,” Chakri Lokapriya, Mumbai-based chief investment officer at TCG Advisory Services, which manages about $3 billion in assets worldwide, said by phone. “The Fed is looking for an opportunity to normalize rates when the economy is doing well. It is unlikely to raise them in September or December based on recent data.”

Low borrowing costs in the U.S. and other developed countries have supported demand for riskier assets. Global funds have bought $3.6 billion of Indian stocks in the current quarter, the most since the three months ended March 2015 and the highest in Asia after Taiwan and South Korea. The passage of economic reforms, improvement in public finances and timely monsoon rains after two years of drought have lured global funds to Indian assets.

  • Two-wheeler makers Bajaj Auto Ltd. and Hero MotoCorp Ltd. were among the top gainers on the Sensex.
  • Essel Propack Ltd. jumped 5 percent to a record after a unit bought out its German venture.
  • Vardhman Textiles Ltd. soared 10 percent saying it will consider buying back shares.

The Sensex is valued at 16.4 times projected 12-month earnings compared with 12.5 times for the MSCI Emerging Markets Index. The valuation is near the most expensive level since January 2011 reached earlier this month.

To contact the reporters on this story:
Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net; Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net To contact the editors responsible for this story: Jeff Sutherland at jsutherlan13@bloomberg.net Ravil Shirodkar, Andreea Papuc