Sensex trims gains ahead of four-day weekend

Mumbai: Indian shares pared gains to one per cent on Wednesday as investors were wary ahead of a four-day weekend, after rising more than four per cent early on the back of US rate cut and resilient results from big Wall Street banks.

Larsen & Toubro led the gains, climbing 2.7 per cent to Rs2,839, after the engineering and construction firm said it planned to add thermal power generating equipment manufacturing capacity to 4,000 mega-watts a year.

Analysts were not convinced about the strength of the market's rally after sharp losses that had taken the market to a seven-month closing low on Monday.

The main 30-share BSE index ended up 1.09 per cent, or 161.37 points, at 14,994.83, after having risen as much as 4.3 per cent in the opening deals.

"The rally was on the back of global cues," said Jayesh Shroff, fund manager at SBI Mutual Fund. "There will always be a question mark on the sustainability of the momentum... there is more pain left in the system."

Negative trend

The trend was negative in the broader market with 1,922 losers outpacing 755 gainers on volume of 309 million shares.

Indian stock markets are shut today and tomorrow for local holidays. Trading resumes on Monday.

The US Federal Reserve slashed interest rates by 75 basis points on Tuesday to 2.25 per cent, trying to avert a deep recession in the world's largest economy and financial market meltdown. Though the reduction was smaller than some market participants had expected, investors focused on the likelihood of future cuts.

Foreign funds have sold a net $3.6 billion of Indian shares this year, after investing a record $17.4 billion in 2007, but traders expect the US rate cut will help revive inflows.

The BSE index fell 4.9 per cent on the week, its third weekly loss in a row, and is down more than 26 per cent this year, making it one of the worst performers in Asia.

"Investors should not go all out in the market until there's sign of some stability in the global markets. US will not come out of its woes so soon, Neeraj Dewan, director at brokerage Quantum Securities in New Delhi, said.

Shares in most export-driven software services firms gained after fears of a steep recession in their key US market eased following the Fed rate cut.

Infosys Technologies, India's No 2 software exporter, rose 2.2 per cent to Rs1,341.90, third-ranked Wipro gained 4.6 per cent to Rs376.60 and Satyam Computer Services ended up 5.2 per cent at Rs389.95.