A stock broker looks at the Bombay Stock Exchange trading terminal in Mumbai. The S&P BSE Sensex climbed 0.7% at the close yesterday, after changing direction at least six times.

Bloomberg
Mumbai

Indian stocks rose for a second day as emerging-market equities rebounded from a six-year low before the US Federal Reserve’s decision on interest rates.
Sun Pharmaceutical Industries, the nation’s most valuable drugmaker, rose to a one-week high after it agreed to sell a manufacturing unit in the US Hindustan Unilever, the biggest home-products maker, rallied to a three-month high. Oil & Natural Gas Corp, the largest state explorer, rose from its lowest price since May 2009.
The S&P BSE Sensex climbed 0.7% at the close, after changing direction at least six times. The Federal Reserve begins its two-day meeting, with traders pricing in 76% odds that rates will be raised for the first time in almost a decade.
A rout in oil will help outweigh the impact of the Fed’s decision on India, which imports 80% of its energy needs, according to AdviseSure Ventures.
“India is likely to decouple a bit from other emerging markets as the benefit of lower oil prices will overshadow concerns about the Fed’s rate decision,” Abhimanyu Sofat, the co-founder of Mumbai-based investment advisory firm, said by phone. “European equities also opened strong, aiding sentiment.” Foreigners have pulled $489mn from local shares this month before the Fed’s rate decision and as concerns grew on the passage of a unified sales tax bill in parliament.
Opposition lawmakers are protesting an Indian court order for the Congress party’s top leaders to testify in a corruption case, raising the risk of further delays to the tax bill that is the centerpiece of Prime Minister Narendra Modi’s reform push.
“Investors are tracking political developments as the Congress can’t continue to drag its feet on GST for long,” Sofat said.
India’s consumer prices rose 5.4% in November from a year earlier, following a 5% increase in October, according to data released after market hours Monday. The gain may pose a challenge for Reserve Bank of India Governor Raghuram Rajan, who left one of the highest interest rate in major Asian economies unchanged this month as risks to his inflation target of 5% by March 2017 increase.
Rajan expects the Fed to raise interest rates by as much as a quarter point this week.
Global investors bought a net $46mn of Indian stocks on December 11, ending six days of outflows. The Sensex has fallen 8% this year and trades at 14.9 times projected 12-month earnings. The MSCI Emerging Markets Index is valued at a multiple of 10.8.
Meanwhile the rupee gained 0.3%, the most since December 1, to 66.9325 a dollar, according to prices from local banks compiled by Bloomberg.
The currency fell to as low as 67.1275 on Monday, its weakest level since September 2013. It has declined 0.4% in December after losing 2.1% last month in Asia’s worst performance. India’s 10-year sovereign bonds rose the most in more than a week on speculation a surge in the yield to a four-month high lured buyers.
The yield on notes due May 2025 fell three basis points to 7.79% in Mumbai, the biggest decline since December 3, according to prices from the central bank’s trading system.
It climbed to 7.82% on Monday, the highest close since August 24, as foreign holdings of local debt continued to fall ahead of a potential increase in US interest rates this week.
Bonds rose even as data after the close of markets Monday showed consumer-price inflation accelerated to a 14-month high of 5.41% in November.
“Investors probably found yield levels above 7.80% attractive and that contributed to the rebound in bonds,” said Sagar Shah, vice president for treasury at RBL Bank in Mumbai. Ten-year notes may advance “in the coming weeks” as the uncertainty related to US rates subsides, he said.
Futures contracts show there’s a 78% chance that the Federal Reserve will raise borrowing costs at its meeting. Foreign holdings of rupee-denominated debt have dropped Rs15.5bn ($232mn) this month, according to data from the National Securities Depository. That follows a decline of Rs46.9bn in November, which was the largest since May.