Indian shares rally on fuel price hike hopes

Mumbai: India's main index rose 1.7 per cent yesterday, its biggest percentage gain in nearly two months, after a steep hike in petrol prices boosted oil stocks such as ONGC by kindling hopes of similar hikes in other fuels such as diesel.

More broadly, it was also seen by some traders as a tentative signal that the government may be getting more serious about tackling its fuel subsidies — a big cause of its bloated fiscal deficit.

That sparked a rally in blue chips such as ICICI Bank, especially at a time when some investors saw Indian markets as oversold, while Bharti Airtel surged after saying it would buy 49 per cent stake in a Qualcomm joint venture in India.

However, some of these gains may reverse today after a ministry official clarified after the markets close that the meeting may not happen after all, citing the political backlash against the petrol price hike.

"Today's bounceback was unexpected. At least there is some action from the government where there was a complete limbo for a long time," said Ambareesh Baliga, chief operating officer at advisory firm Way2Wealth.

India's main 30-share BSE index rose 1.72 per cent to 16,222.30, posting its biggest daily percentage gain since March 30 and recovering after two previous sessions of losses.

The broader 50-share NSE index rose 1.77 per cent to 4,921.40.

Energy stocks were among the day's big gainers after a finance ministry official said a government committee headed by Finance Minister Pranab Mukherjee will meet today to discuss raising diesel, liquefied petroleum gas and kerosene prices.

A hike in fuels such as diesel would have a far bigger impact on the country's fiscal standing than the petrol price hike announced on Wednesday.

Doubts about whether the government can keep to its 5.1 per cent fiscal deficit target for the fiscal year ending in March 2013 have been a big concern for investors and, along with global risk aversion, contributed to the fall in Indian markets.

India's BSE index is down 6.3 per cent for the month, while the rupee yesterday hit its latest record low at 56.40 against the dollar.