India shares rise on signs of market recovery

A revival in global risk appetite and expectations the struggling world economy may have seen a bottom should stand in good stead for Indian shares, which have risen for four weeks in a row for the first time in 11 months.

The top-30 Sensex climbed 3 per cent last week, powering gains to almost 29 per cent since tumbling to a 2009 low in early March. The rally has lifted the marker to positive territory for the year after it had plunged 52 per cent in 2008.

"Against an overall still-cautious view on the Asian equity landscape, we are raising our allocation to India equities," Goldman Sachs said on Wednesday, adding it expected Indian companies to report "relatively better corporate growth than in most other markets".

The brokerage raised India to "market weight," the first upgrade since cut the country to "underweight" in January 2008, when the Sensex climbed to a record.

The blue-chip index posted its highest close since November 10 last week at 10,348.83, but is still more than half below its historic peak of 21,206.77 set on January 10, 2008.

Goldman said India's higher proportion of domestic demand drivers than many other Asian economies would help sustain profit growth.

India's $1 trillion (Dh3.67 trillion) economy should expand 6.5 per cent in 2008-09, Planning Commission Deputy Chairman Montek Singh Ahluwalia said the week before. Although this is sharply lower than nine per cent or more in the previous three years, the pace is faster than the International Monetary Fund's forecast of a 0.5 per cent expansion in the global economy in 2009.

Equity trader Rasesh Shah said automobile sales in March indicated a glimmer of hope for a turnaround, while the outlook for battered financial stocks is seen boosted by advance taxes that indicate strong earnings for banks.

Indian cabinet secretary K.M. Chandrasekhar last week said the government has asked state-controlled banks to review their lending rates and aim for a robust 24 per cent loan growth.

- The writer is a journalist based in India