India Stocks Rise to Seven-Week High as Inflation Concern Eases

By Pooja Thakur

Aug. 6 (Bloomberg) -- Indian stocks rose to the highest in seven weeks, led by banks and automakers, as falling oil prices spurred optimism that inflation will ease and boost consumer spending.

ICICI Bank Ltd., the country's second-largest lender by assets, climbed to a two-week high, while HDFC Bank Ltd., the third-biggest, jumped to its highest since June 2. Maruti Suzuki India Ltd., the nation's largest carmaker, rose to its highest in more than a month.

``Investors are betting rates may have peaked in India on optimism inflation will decline after the fall in commodity prices,'' said Ajay Argal, who helps manage about $9.2 billion in assets at Birla Sun Life Asset Management Co. in Mumbai.

The Bombay Stock Exchange's Sensitive Index, or Sensex, added 314.71, or 2.1 percent, to 15,275.78 as of 12:25 p.m. local time, headed for its highest close since June 18. The S&P CNX Nifty Index on the National Stock Exchange climbed 71.15, or 1.6 percent, to 4,574.

The Sensitive index has fallen 25 percent this year as interest rates at a seven-year high slowed economic growth and inflation at a 13-year high eroded spending by consumers and companies.

Oil dropped for a third day, falling as much as 0.9 percent to $118.10, amid speculation demand will be reduced by economic slowdowns in the U.S. and Europe. Oil has lost more than $28 since touching a record $147.27 a barrel on July 11. The U.S. Federal Reserve yesterday forecast inflation to ease through next year as it left its benchmark interest rate unchanged.

``The Fed move to hold interest rates and a drop in oil and commodity prices have acted as a positive trigger for markets globally including India,'' Birla Sun Life's Argal said.

ICICI, Maruti

ICICI added 5.6 percent to 732.75 rupees. A close at that level would be the highest since July 23. HDFC Bank Ltd., India's third-biggest lender, surged 7.2 percent to 1,269.90 rupees, the highest since June 2.

Maruti rose 7.1 percent to 657.5 rupees, set to close at its highest since June 26. Tata Motors Ltd., India's largest truck and bus maker, climbed 5 percent to 429.25 rupees.

Overseas investors sold a net 3.42 billion rupees ($81 million) of Indian equities on Aug. 1, boosting their net outflow this year from stocks to $6.7 billion, according to the nation's stock market regulator.

To contact the reporter on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net;