Coal India Ltd. (COAL), the world’s biggest producer of the fuel, jumped 3.9 percent, the most in two weeks. Tata Motors Ltd. (TTMT), the owner of Jaguar Land Rover, reached an eight-month high. Reliance Industries Ltd. (RIL), the country’s most valuable company, gained for a second day. State Bank of India extended an 11-day, 24 percent rally.

The BSE India Sensitive Index (SENSEX), or Sensex, rose 0.5 percent to 17,077.18 at 3:30 p.m. close in Mumbai, its highest level since Nov. 14. The Reserve Bank of India yesterday reduced the amount of deposits banks must keep aside as reserves for the first time since 2009 and signaled future interest-rate cuts, joining other emerging markets in shielding growth. The Sensex sank 25 percent last year amid concern a weak rupee and record interest-rate increases will exacerbate the effects of Europe’s debt crisis on company earnings.

“The RBI is saying interest rates have peaked and that will reflect positively on growth expectations,” A. Balasubramanian, who oversees 604 billion rupees ($12 billion) in assets as chief executive officer of Birla Sun Life Asset Management Co. in Mumbai, told Bloomberg UTV today. “2012 may turn out to be better than last year.”

The RBI cut the cash reserve ratio to 5.5 percent from 6 percent, the monetary authority said yesterday. While India’s inflation is the fastest in the BRIC group of nations, the rate eased to a two-year low in December, giving the central bank scope to inject 320 billion rupees into an economy that grew the least since 2009 in the September quarter. The RBI also cut its economic growth forecast to 7 percent for the year ending in March from the 7.6 percent predicted in October.

Growth Focus

Six out of 13 Sensex companies that have posted December quarter earnings missed analyst estimates. Forty percent lagged in the September quarter and 47 percent in the previous three months. Forecasts for Sensex companies for the year ending in March have fallen 8.7 percent to 1,150 rupees per share, the most since March 2009, data compiled by Bloomberg show.

“The growth-inflation balance of the monetary policy has shifted to growth, while ensuring inflationary pressures remain contained,” the central bank said in yesterday’s statement. The reserve-ratio cut “can be viewed as a reinforcement of the guidance that future rate actions will be towards lowering them,” according to the statement.

Brazil pared its benchmark rate on Jan. 18 by half a point for a fourth straight policy review. Russia in December trimmed its benchmark rate, while China in November reduced the reserve ratio for banks for the first time since 2008.

‘Stance Reversal’

“We expect a rate cut in the next RBI meeting in March,” said Hiren Ved, chief investment officer at Alchemy Investment Management Ltd. “We expect the market to extend gains in the near-term as the Reserve Bank’s action significantly indicates its rate-reversal stance.”

The S&P CNX Nifty (NIFTY) Index on the National Stock Exchange of India Ltd. increased 0.6 percent to 5,158.30. The BSE 200 Index rose 0.8 percent, its highest close since Nov. 14.

Coal India jumped 3.9 percent to 342.9 rupees, the most since Jan. 13, and paced gains among other producers of basic materials. Tata Steel Ltd. (TATA), the nation’s biggest producer, rose 2.9 percent to 444.85, its highest price since Nov. 9. Sterlite Industries Ltd., the largest copper and zinc maker, added 2.3 percent to 113.75 rupees.

Infosys Ltd. (INFO), the nation’s second-largest software maker, gained 1.8 percent to 2,665.8 rupees, its highest level since Jan. 11. Tata Motors surged 4.1 percent to 230.95 rupees, its highest since May 26. Reliance added 0.9 percent to 790.95 rupees, its second day of gains.

Lenders Rally

Housing Development Finance Corp. (HDFC), the biggest mortgage lender, jumped 1.2 percent to 709.2 rupees, the highest close since July 8. State Bank rose for a 12th straight day, gaining 0.8 percent to 2,058 rupees, its longest winning streak since September 2005 and the highest price since Aug. 23. The BSE India Bankex Index (BANKEX) climbed to its highest level since Oct. 31.

Lupin Ltd. (LPC), the Indian drugmaker founded by billionaire Desh Bandhu Gupta, advanced to a seven-week high after Chief Executive Officer Vinita Gupta said the company’s U.S. generics business will be boosted by the launch of 25 new products. The stock climbed 2.7 percent to 459.15 rupees,

Foreign investors sold a net 128 million rupees of local stocks on Jan. 23, ending 14 straight days of purchases. Still, they have bought $1.4 billion of equities this year, compared with an outflow of $512 million in 2011, according to data from the market regulator. The flows have helped the Sensex to a 11 percent advance this month, the best January performance since 1994, when the gauge climbed 19 percent.

Offshore funds invested a record $29.4 billion in 2010, which pushed the Sensex up 17 percent that year.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net  

http://www.bloomberg.com/news/2012-01-25/india-s-sensex-climbs-to-10-week-high-on-policy-speculation.html

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