Business | Markets
Indian shares rally 2.2% as banks and realty gain
Indian shares rose 2.2 per cent on Monday to their highest close in eight weeks, led by Reliance Industries and ICICI Bank, as a global rally raised hopes for foreign inflows.
- Reuters
- Published: 21:08 August 11, 2008
New Delhi: Indian shares rose 2.2 per cent on Monday to their highest close in eight weeks, led by Reliance Industries and ICICI Bank, as a global rally raised hopes for foreign inflows.
Oil prices that rose more than $1 to above $116 a barrel, but well below record highs of above $147 in July, also underpinned the market with investors hoping they would calm inflation expectations and ease upward pressure on interest rates.
"We are now getting increasingly convinced after the dramatic fall in oil prices that the bad phase is over and people are coming back to the fundamentals," said Gajendra Nagpal, CEO at Unicon Financial.
The 30-share main BSE index rose 2.22 per cent, or 336.10 points, to 15,503.92, its highest close since June 17.
The index had risen 3.5 per cent last week, registering a fifth weekly gain in a row, its best run this year.
Reliance Industries rose 3.4 per cent and ICICI Bank gained 5.7 per cent. The two stocks constitute more than 23 per cent of the main index.
The benchmark has risen 23.3 per cent from its 2008 closing low hit in mid-July, but is down about 23.6 per cent on the year.
Traders said they would be watching June industrial output data today, expected to show a slight revival to five per cent from May, but stay below the double-digit levels seen in 2006 and early 2007.
Nagpal said stock prices had factored in the expected slight improvement in factory output and revival in monsoon rains, which could help farm output. "Only a sharp decline in oil and commodities can help the market sustain this rally. It's going to be difficult otherwise," he said.
A further drop in oil and commodity prices could calm inflation, which had climbed above 12 per cent for the first time in more than 13 years in late July.
Foreign funds have bought Indian shares worth $231 million in August after selling more than $250 million in July, as the fall in oil prices raised hopes for cooling inflation.
Still, they are net sellers of more than $6 billion 2008, after buying a record $17.4 billion in the previous year.
Banks and realty stocks that had been harshly beaten down after a series of monetary tightening were back in favour on hopes for steadier outlook for rates.
The BSE bank index rose 4.2 per cent and the realty index gained 5.3 per cent.
Top lender State Bank of India firmed 4.7 per cent to Rs1,592.60 while leading developer DLF climbed 3.6 per cent and smaller rival Unitech rose 6.3 per cent.
All but five of the benchmark components were up and in the broader market, gainers overwhelmed losers by nearly two-to-one on volume of 320 million shares. The 50-share NSE index gained 2.01 per cent to 4,620.40.
Elsewhere in the region, Karachi's 100-share index rose 2.65 per cent to 10,171.86, but Colombo's All-share index eased 0.08 per cent to 2,464.47.
Currency: Rupee gains
The Indian rupee firmed on Monday as soft oil prices eased expectations for a wider trade deficit, while gains in the local share market raised hopes for foreign fund inflows.
At 10.10am (0440 GMT), the partially convertible rupee was at 41.94/95 per dollar, 0.3 per cent stronger than 42.065/075 on Friday. It had hit 41.82 in late July, its highest since May 12.
"The rupee is stronger mainly on lower oil and gains in local shares but there is strong support for the dollar at 41.90, which should hold the rupee in a range of 41.90 to 42.10," a senior dealer said.
- Reuters
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