(Bloomberg) -- Indian stocks advanced after the government raised minimum assured prices for crops like cotton and paddy rice -- a step that could potentially boost rural incomes and spending.
The benchmark S&P BSE Sensex rose 0.8 percent to 35,645.40 in Mumbai, reversing a decline of as much as 0.2 percent. Automakers Bajaj Auto Ltd. and Maruti Suzuki India Ltd. gained the most on the gauge.
“Guaranteed returns over the cost of production may help boost consumer demand and benefit automobile companies,” Devansh Lakhani, a director at Lakhani Financial Services Ltd., said by phone.
Higher minimum prices may help boost incomes of farmers, with about 800 million of India's 1.3 billion population depending directly or indirectly on agriculture. The government raised assured prices to ensure farmers get at least 50 percent more than their production costs, a move toward fulfilling Prime Minister Narendra Modi's pledge to double farm incomes by 2022.
Eleven of 19 industry sub-indexes compiled by BSE Ltd. advanced, led by a gauge of automobile companies. Vehicle makers clocked strong sales growth in June, industry data showed this week. Car maker Maruti Suzuki's total vehicle sales jumped 36 percent from a year earlier in June, while Bajaj Auto's motorcycle sales climbed 65 percent.
To contact the reporters on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net;Nupur Acharya in Mumbai at nacharya7@bloomberg.net
To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Margo Towie, Tom Redmond
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