Sensex bounces back but outlook remains negative

Mumbai: Indian shares recouped 2.6 per cent on Friday from a six-month closing low in the previous session, but concerns about a wobbly US economy and credit market woes remained.

Traders said there was some bargain hunting after the market had plunged more than a quarter from its January peak, though investors were circumspect and worried about more volatility.

"Today's rise was more of a technical bounceback," said Nipun Mehta, chief executive at Unitis Tower Wealth Advisors. "Markets are still nervous and the outlook remains more negative than positive."

ICICI Bank rose 4.8 per cent to Rs878.20 as sentiment for financials were helped after agency Standard & Poor's said an end to subprime-related write-downs was in sight.

The BSE 30-share index added 2.63 per cent, or 403.17 points, to 15,760.52, with 24 components rising.

The benchmark, which fell 4.8 per cent on Thursday, was down 1.35 per cent on the week - its second weekly loss in a row.

"Some value buying emerged today but the market is still short of liquidity and waiting for domestic funds to loosen their purse strings," said Raj Bhandari, director at Networth Stock Broking.

Rising inflation

Rising inflation and slowing economic growth could weigh on the index, which is more than 22 per cent down this year and over a quarter below a life high of 21,206.77 hit on January 10.

JPMorgan cut its forecast for India's economic growth in the fiscal year starting April 1 to 7 per cent from 7.5 per cent, which would be the country's slowest pace of expansion in six years.

Petrochemicals and refiner Reliance Industries, India's top listed stock, rose 3.6 per cent to Rs2,321.70 after sliding 5.7 per cent on Thursday.

Jaiprakash Associates rose 7.8 per cent to Rs236.25 after it was included in the main BSE index. Top listed realty firm DLF also rose 7.8 per cent to Rs654.25 on its entry into the NSE's 50-share index.

Steel makers rose after the government on Thursday approved a long-delayed mining policy that would ease investments by foreign and domestic companies in the mining sector.

Tata Steel, the world's sixth-largest steelmaker rose 2.6 per cent to Rs715.25 and state-run Steel Authority of India gained four per cent to Rs202.05.

In the broader market 1,466 losers beat 1,205 gainers on volume of 334.5 million shares.

The 50-share NSE index rose 2.64 per cent to 4,745.80.