India shares rise 2.5% but market still shaky

New Delhi: Indian shares snapped a three-day losing streak to end 2.48 per cent higher on Monday, although they failed to hold onto gains made after the central bank cut its key lending rate for the first time in more than four years.

Top private lender ICICI Bank gained five per cent to Rs411.10, and HDFC Bank added 5.9 per cent to Rs1,084.85.

ICICI is still down 67 per cent on the year on concerns about its exposure to the global financial crisis.

The central bank cut its repo rate by 100 basis points to eight per cent to shore up markets and the economy against the global crisis, but analysts said it may not have a lasting impact on a stock market that has fallen by half this year.

"It will help banks, but a broader stocks rally will fizzle out in two to three days as selling will come in at higher levels," said V.K. Sharma, head of research at Anagram Stock Broking.

The benchmark 30-share BSE index was up 3.6 per cent when the surprise rate cut was announced. It extended gains to 5.6 per cent before paring the rise through afternoon trade. It closed up 247.74 points at 10,223.09, with 20 components rising.

"[The rate cut] won't lead to a spurt in the market because currently it's driven more by the global liquidity issues. Unless the pressures ease off, you won't see any upward bias," said Mahesh Patil, vice-president at Birla Sun Life Mutual Fund.

Foreign funds have sold a net $11.8 billion of shares so far in 2008, compared to record net buying of $17.4 billion last year.

In the broader market, 1,650 losers led 928 gainers on volume of 233 million shares. The mid-cap and small-cap indices fell more than one per cent each.

The 50-share NSE index gained 1.58 per cent to 3,122.80.