Mumbai: Indian stocks rose for the second day after comments by Reserve Bank of India Governor Duvvuri Subbarao increased optimism the government will announce plans to spur expansion in its budget next week.
State Bank of India Ltd., the nation's biggest lender, rose the most in almost three weeks after Subbarao said it isn't advisable to target inflation as policy makers need to consider the need for economic growth as well. Tata Steel Ltd., the nation's biggest producer of the alloy, jumped the most in more than two months after its European unit returned to profit.
"This is a pre-budget rally," said Niraj Shah, an analyst with Centrum Broking Pvt. in Mumbai. "The government needs to balance growth, inflation and fiscal deficit. It would also like to keep the stock markets happy. Metal stocks are likely to lead as there is strong demand in the Indian economy."
The Bombay Stock Exchange's Sensitive Index, or Sensex, gained 202.23, or 1.3 per cent, to 16,428.91. The S&P CNX Nifty Index on the National Stock Exchange rose 1.2 per cent to 4,914. The BSE 200 Index increased 1.1 per cent to 2,080.70.
Investors should buy Indian stocks amid any drops as earnings growth counters the impact of accelerating inflation and a possible decline in global risk appetite, Morgan Stanley said. The macroeconomic environment in India is similar to 2004, when a rise in interest rates prompted a "temporary" decline in the stock market's valuations, analysts Ridham Desai and Sheela Rathi said in a report on Tuesday.
