Indian shares pare losses on rate hope

Mumbai: Indian shares pared losses to 1.1 per cent yesterday as banks and automakers rallied on hopes for a rate cut, after the market fell sharply in the morning on renewed worries about a US downturn.

India's central bank reviews monetary policy today, and analysts are betting it would lower the key lending rate for the first time in four years, following hefty US rate cuts last week. Seven of 13 analysts polled expect a 0.25 per cent cut in the repo rate to 7.50 per cent, which could benefit banks and automobiles.

The 30-share BSE index closed down 1.14 per cent, or 208.9 points, at 18,152.78, with 18 of the components falling.

The benchmark had fallen by five per cent by early afternoon, weighed down by uncertainties in global equity markets, after losing 3.4 per cent in a turbulent last week. "People are speculating that there could be some announcement of a rate cut tomorrow. That's why banks and auto stocks saw some buying," said Sandeep Neema, fund manager at JM Financial Mutual Fund.

Motorcycle maker Bajaj Auto gained 8.6 per cent to Rs2,459.35, while top car maker Maruti Suzuki, which also reports quarterly results on Monday rose four per cent to Rs862.60.

However, analysts were divided on whether the market had found a bottom.

Outlook

"The market will remain [volatile] for some time when there is so much of global uncertainty. We will have to live with that," said Sanjeev Patkar, head of research at Dolat Capital.

But JM Financial's Neema said he expected the market to stabilise at around the current levels.