Mumbai: Indian shares closed 0.2% higher on Monday, erasing most of the early gains triggered by the billionaire Ambani brothers’ weekend reconciliatory move, plagued by euro zone jitters in the wake of Spanish bank bailout.
Firms controlled by Mukesh and Anil Ambani said they aim to soon reach a conclusion on a gas supply pact between Reliance Industries (RIL) and Reliance Natural Resources that had been at the centre of their long-standing feud.
The brothers will Rs.now be free to compete on each other’s turf, with the exception of gas-fired power plants, removing a source of friction between the two conglomerates.
Energy giant Reliance Industries, which has the largest weight on the BSE, led the gainers and rose as much as 5.3%. It closed 2.6% higher, registering its best gain in one-and-a-half months at 1,021.45 rupees.
“We believe the new agreement is positive for RIL, as it opens up opportunities for growth in new sectors within India,” Goldman Sachs analysts Nilesh Banerjee and Nishant Baranwal said in a note.
“But, given the competitive landscape in telecom, financial services etc., any potential entry by RIL could be in the form of co-operation with ADAG (Anil Dhirubhai Ambani Group) or via industry consolidation, in our view.”
Anil Ambani-controlled Reliance Natural Resources soared 22.6%, its best single-day gain in nearly a year.
The BSE 30-share index Sensex rose 0.15%, or 23.94 points, to finish at 16,469.55, with only 12 of its components rising. It had risen as much as 1.9% in early trade.
The BSE benchmark is down 6.2% in May, as foreign funds have withdrawn around $1.5 billion from Indian equities so far this month as euro zone jitters triggered flight to safety.
Net foreign fund inflows into Indian shares so far this year stood at $5.1 billion, after a record $17.5 billion inflows in 2009, which saw the benchmark gain 81%.
Other companies controlled by the Anil Dhirubhai Ambani Group, Reliance Infrastructure and Reliance Communications, jumped 6.2% and 10.9% respectively.
Reliance Power was up 7.9% while Reliance Capital% gained 4.8%. Reliance Mediaworks and Reliance Media World% rose 3.9% and 4.9% respectively.
“The Ambani brothers’ move helped the market early today. Also, there was short-covering ahead of expiry (of monthly derivative contracts on National Stock Exchange) on Thursday,” said RK Gupta, managing director of Taurus Mutual Fund.
“However, uncertainty still looms over the market. The issues in Europe are much deeper than... perceived,” he added.
Aluminium maker Hindalco erased early gains and closed 3.9% lower as the prices of the metal edged lower in London.
Financials dragged, hurt by the reduction in risk appetite which hit the broader market.
Top lender State Bank of India dropped 1.3% while private lenders ICICI Bank and HDFC Bank closed 0.3% and 0.1% lower.
In the broader market, advancing shares led declining ones in the ratio of 1:5 in a volume of 361 million shares, slightly better than that seen last Friday.
The NSE 50-share index Nifty closed 0.3% higher at 4,943.95 points.
Elsewhere, European shares turned negative in morning trade with investors staying cautious on growing aversion to risk after news that the Bank of Spain was taking control of savings bank CajaSur.
At 1113 GMT, the pan-European FTSEurofirst 300 index gave up early gains and was down 0.4%.