Employees work at their desks in a brokerage firm in Mumbai (file). India's benchmark stock index rose 1.2% to 21,289.49 yesterday. Bloomberg / Mumbai India's benchmark stock index rose to its highest level in five weeks, led by banks and automobile companies, after inflation slowed more than economists expected in December to a five-month low. ICICI Bank increased 2.1%, sending a gauge of lenders to its highest level in two weeks. Hero MotoCorp added 1.8%, helping a measure of 10 automakers to its biggest gain in a month. Coal India Ltd advanced to a one-week high after saying it'll pay a record dividend. The S&P BSE Sensex increased 1.2% to 21,289.49, the highest close since December 9 . The wholesale-price index rose 6.16%, below a Bloomberg survey median of 6.99%, giving the central bank scope to keep interest rates on hold for a second consecutive meeting later this month. Reserve Bank of India Governor Raghuram Rajan left the main rate unchanged at 7.75% on December 18 , saying the bank is awaiting more data. His next review is due on January 28 . "We expect the RBI to hold borrowing costs, and any cut will come in the latter half of the year," S Naganath, chief investment officer with DSP BlackRock Investment Managers, which manages $5bn , said in Mumbai yesterday. "Inflation will come down over the next 12 months." ICICI Bank , the country's second-biggest lender, cut this year's loss to 3.7%. Mortgage lender Housing Development Finance Corp rallied 2.6%. The S&P BSE Bankex rose 1.6%. Hero MotoCorp jumped the most in four weeks. The S&P BSE India Auto Index added 1.2%, the most since December 20 . "Inflation will moderate further due to better monsoon and good harvests," Gajendra Nagpal , executive officer at Augment Financial Services , said by phone from New Delhi . A cooling in consumer prices will prompt the central bank to cut rates, benefiting banks, automakers and developers, he said. India received 37 inches of rain in the annual wet season that extends from June 1 to September 30 , the most in six years, according to the nation's weather office. Food-grain output in the 2013-2014 season may climb to a record, Agriculture Minister Sharad Pawar said in September. Coal India jumped 2.2% to Rs 295.2 . The world's producer miner of the fuel will pay a record Rs 183bn ( $3bn ) in dividend to help the government fund its budget shortfall, the company said yesterday after the market closed. The payout of Rs 29 a share pushed up the dividend yield to 10% from 4.84%, data compiled by Bloomberg show. Engineering company Larsen & Toubro rose 2.8%, the most in five weeks. Sesa Sterlite jumped 2.4%, ending three days of losses while aluminum producer Hindalco Industries had the biggest advance in three weeks. The two companies were among the top 10 gainers on the S&P BSE India Metal Index yesterday. Global investors bought a combined $28mn of local shares on January 13 and 14, data released by the stock market regulator showed. Banks were closed on Tuesday for a public holiday. Foreigners invested $20bn last year, the most in Asia after Japan , according to data compiled by Bloomberg . Net purchases in 2012 were $24.6bn , the data show. The 50-stock CNX Nifty Index rose 1.3% to 6,320.90. The Sensex is valued at 13.3 times projected 12-month profits, data compiled by Bloomberg show. The MSCI Emerging Markets Index is valued at 10.3 times earnings. Meanwhile rupee snapped a two-day gain as speculation fueled by US data that the Federal Reserve will further cut stimulus prevailed over a local report showing inflation in Asia's third-largest economy is easing. US retail sales rose 0.2% in December, beating the 0.1% gain predicted by economists in a Bloomberg survey. India's wholesale prices increased 6.16% last month from a year earlier, climbing the least since July. The median estimate in a Bloomberg survey was for a 6.99% advance. The rupee fell 0.1% from Jan. 13 to 61.5475 per dollar in Mumbai , according to prices from local banks compiled by Bloomberg . The local currency market was shut yesterday for a holiday. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 14 basis points, or 0.14 percentage point, to 8.52%. The rate has dropped from 22.24% on August 28 when the rupee plunged to a record 68.845 per dollar. The taper concerns have "hurt emerging market equities and currencies," analysts at Edelweiss Financial Advisors Ltd , including Milind Vora in Mumbai , wrote in a research report today. "But India has shown significant resilience. The dollar- rupee has stabilized." Consumer prices rose 9.87% in December, official data showed January 13, slower than the 10.06% estimated in a separate Bloomberg survey. The RBI's January 28 policy review comes a day before the Federal Open Market Committee is due to conclude its two-day meeting. This week, India's central bank eased some trading curbs imposed as the rupee depreciated in the past two years. Investors can conditionally cancel and rebook forward contracts with remaining maturities of one year or less, the RBI said in a statement after the market shut on January 13 . This is a sign that policy makers are confident about the currency's relative stability, Radhika Rao , an economist at DBS Bank Ltd in Singapore, wrote in a research report today. Three-month offshore non-deliverable forwards slipped 0.2% from Tuesday to 62.69 per dollar, data compiled by Bloomberg show. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
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