Mumbai:India's benchmark stock-index rose to an all-time high after the nation's central bank signaled it would ease monetary policy if inflation slows faster than anticipated and cut the liquidity ratio requirement for banks.
Tata Steel and Steel Authority of India surged at least four per cent after Odisha state allowed eight iron-ore mines to reopen after the Supreme Court's order. Sesa Sterlite, India's largest copper and aluminium producer, jumped to a three-year high. NTPC, the biggest power utility, rallied to its highest price in four months.
The S&P BSE Sensex added 0.7 per cent to a record 24,858.59 at the close in Mumbai. Reserve Bank of India Governor Raghuram Rajan kept the repurchase rate at eight per cent, as forecast by all 38 analysts in a Bloomberg survey. He has increased borrowing costs three times since taking change in September to restrict price gains. Rajan cut the proportion of deposits banks need to invest in government debt to 22.5 per cent from 23 per cent.
"The SLR cut is a signaling device about RBI's dovish stance," Bharat Rawla, head of equities at Macquarie Capital Securities (India), said in an e-mail interview on Tuesday. "Any improvement in inflation ahead of expectations can open the door for a rate cut."
The RBI said further policy tightening won't be warranted if consumer-price inflation stays on course to hit eight per cent in January 2015 and six per cent a year later. If disinflation is faster than anticipated "it will provide headroom for an easing of the policy stance," it said.
Tata Steel soared 6.9 per cent to its highest level since August 2011. Steel Authority jumped 4.3 per cent. Eight mines, with an annual combined capacity of 20 million tons, resumed ore extraction, G. Srinivas, the mines secretary at the Odisha government, said yesterday by phone.
These include four mines of Tata Steel, three of Steel Authority and one belonging to Orissa Mining Corp.
The Supreme Court on May 16 ordered suspension of mining at 26 quarries, pending renewal of extraction leases from the regional government. The court gave six months to the state to dispose all applications for renewing permits and asked it to first process the applications for mines owned by steelmakers. Hindalco Industries increased 3.4 per cent, while Sesa advanced 6.4 per cent to its highest level since May 17, 2011.
Coal India rallied 5.4 per cent, extending last month's 27 per cent rally. Oil & Natural Gas Corp. jumped 4.3 per cent. Bharat Heavy Electricals, India's biggest producer of power-equipments, soared 3.5 per cent, taking this year's gains to 46 per cent. NTPC increased 3.1 per cent.