India stocks fluctuate as inflation data spurs rate-cut optimism

AFP

Indian stocks swung between gains and losses as the nation’s benchmark inflation rate eased more than estimated, reviving calls for an interest-rate cut amid a global selloff.
Two shares climbed for each that dropped on the BSE 100 Index, which was little changed at 10:52 a.m. in Mumbai after changing direction at least six times. The gauge posted its steepest retreat in almost three months on Monday as stocks around the world slumped on concern that central banks are preparing to wean markets off unprecedented stimulus.
India’s consumer prices increased 5.05 percent in August from a year earlier, official data showed after trading ended on Monday. That’s slower than the 5.2 percent median estimate in a Bloomberg survey and less than the previous month’s 6.07 percent rate. The nation’s markets were closed Tuesday for a public holiday.
“The drop in consumer-price inflation increases the probability of a rate cut, and if the Fed doesn’t raise rates at its next meeting, stocks will rebound sharply,” Arjun Prajapati, vice president at Asit C. Mehta Investment Interrmediates Ltd. in Mumbai, said by phone.
A softening in some of Asia’s strongest inflation would allow newly appointed Reserve Bank of India Governor Urjit Patel room to retain his predecessor Raghuram Rajan’s “accommodative” monetary stance to stimulate investment. At his last review Aug. 9, Rajan left the key repurchase rate unchanged at a five-year low of 6.5 percent and flagged upward risks to the central bank’s CPI target of 5 percent by March 2017. The next policy meeting is on Oct. 4.
The MSCI Asia Pacific Index lost 0.6 percent as Asian stocks extended a global slump and volatility soared after a report showed fund managers are hoarding more money in cash amid uncertainty over the trajectory of central bank stimulus globally.
State Bank of India and ICICI Bank Ltd. were among the top gainers on the Sensex, while Asian Paints Ltd. climbed the most in a week. Coal India Ltd., the world’s biggest producer of the fuel, retreated the most in a month after its first-quarter profit declined 15 percent from a year earlier. Tata Steel Ltd., the biggest producer of the alloy, dropped to a six-week low after posting a third straight quarterly loss.