New Delhi: The BSE Sensex erased early losses and climbed 2% on Wednesday, to start the new financial year on a positive note, but political and economic uncertainties could weigh on investor confidence in the coming weeks.
Leading energy company Reliance Industries, top mortgage firm Housing Development Finance Corp and outsourcer Infosys Technologies led the the rise, while No.1 telecoms firm Bharti Airtel and Bharat Heavy Electricals were laggards.
Trading is expected to be choppy ahead of month-long general elections that begin in mid-April amid worries about the slowing economy.
Indian manufacturing activity contracted for a fifth straight month in March and exports fell in February as the global economic downturn depressed demand and the outlook remains clouded by uncertainties.
The 30-share BSE index closed up 1.99%, or 193.49 points, at 9,901.99, after falling as much as 1.7% at one stage. The 50-share NSE index rose 1.3% to 3,060.65.
The benchmark had risen 9.2% in March, its best performance since last April, helping it post a quarterly gain for the first time since the last quarter of 2007. It fell 26% in 2008/09 fiscal year.
Twenty of its components advanced, while in the broader section gainers outstripped losers in the ratio of more than 3:1 on moderate volume of 344.5 million shares.
“Investors are unwilling to go short, but are not taking too many long positions either,” R. Sriram, a technical analyst at ICICI Securities, said.
He said the coming elections would keep investors wary.
India will only see piecemeal pro-market reforms after the general election, a Reuters poll of 14 leading analysts has predicted. An alliance led by the ruling Congress party has lost ground over the last week amid coalition squabbles and may need leftist support to win office, the analysts added.
“We see some profit booking in some stocks, but it’s not like before where investors were completely exiting their holdings,” Sriram said.
However, economic worries remain.
India’s current account deficit leapt to its highest in 18 years in the December quarter as the global crisis choked inflows, while the fiscal deficit for the first 11 months of 2008/09 reached 94% of an upwardly revised full-year forecast after the government went on a spending spree to stimulate a slowing economy.
The government plans to sell Rs2.41 trillion ($47.5 billion) of bonds, two-thirds of its annual target, in the first half of 2009/10, raising fears in an already nervous market that funding needs may be bigger than expected.
Reliance Industries, which has the biggest weight in the main index, rose 3.7% to Rs1,579.45, while HDFC gained 6.7% to Rs1,505.80. No. 2 software-services exporter Infosys Technologies firmed 3.9% to Rs1,375.50.
Automaker Mahindra and Mahindra climbed almost 3% to Rs394.60, after the company said its March sales rose 6%.
Bharti dropped 1.7% to Rs615.05, while state-run power equipment firm Bhel slid 2.2% to Rs1,472.05.
Japan’s Nikkei surged 3% but other Asian stocks started the quarter more cautiously as reports of an orderly bankruptcy for General Motors supported sentiment.