Stocks in Indian advanced Friday after the government's industrial production numbers came in higher than expected, offsetting higher inflation data.
India's index of industrial production (IIP) rose 8.6% in February, vs. a revised 5.8% for the previous month, while the annual rate of inflation based on the wholesale price index (WPI) came in at 7.41% for the week ending March 29, vs. 7% registered for the previous week. The Inflation reading marked a three-year high and dealers in the region said the Reserve Bank may be forced to raise interest rates or tighten capital supplies to fight of rising inflation.
"We expect a 50-basis-point hike in the cash reserve ratio before or at the April 29 policy meeting. The central bank will prefer tightening money over raising policy rates and rupee appreciation," said Rajeev Malik, senior economist at JPMorgan Chase in Singapore. The Bombay Stock Exchange Sensitive Index rose 112.54 points, or 0.7%, to 15,807.64.
Earnings season will kick off next week in India with major information technology player Infosys Technologies (INFY) set to report on Tuesday and third-ranked IT company Wipro Limited (WIT) due to report on Friday. Traders said the Indian equity markets will be looking for direction and cues from these key technology earnings reports. American depositary shares of INFY slid 1% to $35.81, and WIT lost 3.5% to $11.03.In the Indian auto sector, Toyota Motor (TM - Get Report) announced it plans step up competition against Tata Motors (TTM) in the low-priced car market with a new car priced in the range of $6,900 to $7,850. Recently, Tata Motors introduced the world's cheapest car, the Nano, which it plans to sell for $2,500. Shares of TTM fell 2.8% to $15.17. The Indian banking sector came under selling pressure Friday as traders fear the central bank will cut off liquidity in an effort to slow growth and fight rising inflation. Shares of Icici Bank (IBN) fell 2.9% to $38.95, and HDFC Bank (HDB - Get Report) slipped 3.5% to $96.24. Among the few Indian ADRs to trade higher Friday were, Rediff.com (REDF), which closed higher by 5.7% to $9.04 and Sify Technologies (SIFY), which rose 4% to $4.87. Both stocks finished up on above-average daily volume. Be sure to check out the Far East Portfolio at Stockpickr.com every night to find out which stocks in India and China are making big moves and announcing major news. For more on Asia, check out Daniel Harrison's coverage at TheStreet.com.