NEWS / Monetary Policy

Sensex rises for 5th week; rupee falls on dollar buy

MUMBAI: India's Sensitive index rose for the fifth straight week. State Bank of India led the advance after the government proposed legislative changes to help it boost capital and meet surging loan demand.

The state's 59.7% holding in State Bank, held through the central bank, will drop to 51% after control of the lender is transferred to the government, the Financial Express newspaper reported, without saying where it obtained the information.

"The move by the government will increase the liquidity in the State Bank stock,'' said Dipak Acharya, who manages the equivalent of $55mn at BOB Asset Management Co in Mumbai. "This has also raised expectations of more reforms in the banking sector.''

The Bombay Stock Exchange's Sensitive Index, or Sensex, rose 40.25, or 0.4%, to 11,572.20 at the 3.30pm local time close. The Sensex climbed 0.9% this week.

The S&P/CNX Nifty Index on the National Stock Exchange, also in Mumbai, climbed 15.55, or 0.5%, to 3385.95.

State Bank of India surged to a more than three-month high. The shares rose Rs29.65, or 3.4%, to Rs903.75. Reliance Industries Ltd, the country's biggest non-state refiner, gained Rs3.95, or 0.4%, to Rs1,110.5. It will pay Rs2bn ($43mn) to buy almost 40% of a port near Mumbai, the Economic Times said, citing an unidentified person.

Reliance will develop the Rewas Port, which will handle containers and bulk cargo, with Amma Lines Ltd.

Tata Consultancy Services Ltd, India's biggest software services company, and Satyam Computer Services Ltd, the nation's fourth-biggest, rose after CNBC-TV18 television channel reported the two companies will share an order worth as much as $150mn from Qantas.

Tata Consultancy rose Rs7.15, or 0.7%, to Rs974.55. Satyam Computer added Rs3.5, or 0.4%, to Rs811.15.

Overseas investors sold a net Rs521mn of Indian shares on Wednesday according to the latest figures from the Securities and Exchange Board of India's website. That's the second day of net sales after 10 straight days of purchases.

The rupee snapped four weeks of gains, on speculation refiners sold the currency to buy dollars for paying import bills.

More expensive crude oil costs raised concern the nation's trade deficit will widen, adding pressure on the rupee to weaken.

India's cost of importing oil has risen more than 19% a barrel this year, contributing to the currency's 3.2% drop in the period, the second-worst performer among 15 Asia-Pacific currencies tracked by Bloomberg.

"Dollar demand from oil companies is strong and is taking away any support for the rupee,'' said MA Sardesai, head of treasury at state-owned Bank of Maharashtra in Mumbai. "We have been buying some amount of dollars for our clients.''

The rupee fell 0.2% from a week earlier to 46.5575 against the dollar as of the 5pm close in Mumbai, according to foreign-exchange broker Kanji Pitamber & Co.

A 43% increase in the cost of oil imports and a 10% gain in non-oil shipments widened the trade deficit to $16.7bn in the four months ended July 31.

The gap may reach a record $68.6bn in the financial year ending March 31, 2007, from $51.55bn in the previous fiscal year, according to JPMorgan Chase & Co. - Bloomberg