Mumbai: Indian shares climbed 1.6% on Wednesday as firmer Asian markets and cuts in factory gate duty and service tax triggered short covering ahead of the expiry of monthly derivatives contracts.
Shares of metal and auto firms rose on expectation the duty cuts on Tuesday would boost sales, while banking stocks were firm on renewed hopes for an interest rate cut by the central bank soon.
By 11:36am, the main BSE stock index was up 1.6% to 8,963.02 points, after rising 1.7% at one point. Twenty-eight of its components were trading higher. The 50-share NSE index was up 1.7% at 2,780.70 points.
Largest-listed firm Reliance Industries contributed the most to the gains, mainly due to rollover of derivatives positions, traders said. The stock rose 1.6% to Rs1,273.15.
“The market strength has to do with the firm global cues and also some short covering. But it is rangebound as people are still worried and fresh money is not coming in,” said Neeraj Dewan, director at Quantum Securities.
India on Tuesday slashed factory gate duties and service tax to boost slowing growth as Standard & Poor’s cut its outlook on the country’s long-term sovereign credit rating to negative from stable.
Auto firms, which are expected to pass on the duty cuts in an effort to boost sagging sales, saw sharp gains.
Top car maker Maruti Suzuki rose 2.4% to Rs657.40, Tata Motors which cut prices on its trucks, rose 4.5% to Rs138.10, while Mahindra & Mahindra added 4.3% to Rs307.70.
Metal shares, which will also benefit from the duty cuts, gained. Tata Steel rose 2.5% to Rs164.55, while Hindalco added 3.7% to Rs40.55.
Banking shares rode on speculation a rate cut was round the corner. Largest lender State Bank of India rose 1.9% to Rs1,048 rupees, ICICI Bank added 2.3% to Rs343.10 and HDFC Bank gained 1.3% to Rs868.10.