Indian shares rise 2.2% on stimulus boost

Mumbai: Indian shares climbed 2.2 per cent on Monday after an economic stimulus package and strong global markets boosted sentiment, but the gains were clipped on news of a fire at Reliance Petroleum's new refinery.

Reliance Petroleum, a unit of Reliance Industries, said the fire at the Jamnagar complex in western India was minor, under control and would not hit the commissioning of the refinery.

Reliance Industries ended up 0.1 per cent at Rs1,120 (Dh83.75) after falling from 1,175 to 1,106.20. Reliance Petroleum rose 2.8 per cent to Rs74.50.

"Investors were rattled by the news of the fire at the Reliance refinery," said R.K. Gupta, managing director of Taurus Mutual Fund. "Overall, the mood is still positive fresh from the government package and strong global markets."

The 30-share BSE index rose as much as 5.2 per cent in early deals after the central bank slashed key rates by 100 basis points and the government announced $4 billion of extra spending at the weekend to support growth.

"While these measures will help support growth, the downtrend that is currently under way is unlikely to be reversed soon," Morgan Stanley said in a note.

At close, the index was up 197.42 points at 9,162.62, with all but three components rising. In the broader market, 1,391 gainers led 1,022 losers on normal volume of 244 million shares.

The index among the worst-performers in Asia is down 54.8 per cent so far in 2008, with foreign funds taking out a net $13.7 billion against record inflows of $17.4 billion last year.

Financials led the rise, with No. 2 lender ICICI Bank adding 3.2 per cent to Rs369.80 on the rate cuts and on relaxed norms for some bad debts.

Top mortgage lender Housing Development Fin-ance Corp rose 5.2 per cent to Rs1,511.20 and top lender State Bank of India climbed 2.9 per cent to Rs1,168.25. Steel companies led by Tata Steel rose after a 4 per cent cut in value-added tax allowed firms to drop prices to woo back buyers. Tata Steel rose 7.2 per cent to Rs196, its highest close in a month.

Traders said investors were also encouraged by almost decisive verdicts at five state elections and saw them as a sign of things to come in the national vote in 2009.