Mumbai: Indian shares nudged up 0.7% on Thursday, a day after posting their biggest drop in nearly three months, as world stocks rose on optimism about a likely bailout of Greece and U.S. economic recovery hopes.
Financials and energy major Reliance Industries powered the pullback, but traders said there was uncertainty about foreign portfolio inflows that were a key driver for the market.
“In the near term, we may see some more jitters. We need to wait and see how the situation unfolds,” said Ambareesh Baliga, vice-president of Karvy Stock Broking.
Debt-laden Greece which has requested aid from the European Union and the International Monetary Fund, and Portugal were downgraded by Standard and Poor’s on Tuesday. On Wednesday, the ratings agency downgraded Spain by one-notch to AA.
The 30-share BSE index closed up 0.71% or 123.39 points, at 17,503.47 points, with 19 of its components advancing. The 50-share NSE index rose 0.7% to 5,254.15.
The benchmark had fallen 1.8 percent on Wednesday in its biggest one-day drop since Feb. 5 on worries the debt problems in euro zone would curb global risk appetite.
“India like any other emerging markets will be impacted in the short run from a liquidity squeeze if global investors hold back investments due to the euro zone issue,” Baliga said.
Foreign funds have invested a net of $6.3 billion in Indian equities so far this year, after pumping in a record $17.5 billion in 2009.
Financials rose on hopes India’s economy, expected to expand 8.5% in the fiscal year that began on April 1, will boost demand for loans.
State Bank of India, which dominates the sector, rose 1.7%, while rivals ICICI Bank and HDFC Bank climbed 2.9% and 0.6% respectively.
Housing Development Finance Corp gained 0.7% after the mortgage lender said on Wednesday its board would consider a stock split on Monday.
Baliga said the market was also helped by smooth rollover of monthly derivatives contracts on the National Stock Exchange.
Reliance Industries, which has the heaviest weight on the Sensex, rose 1.7% to 1,034.70 rupees, a day after it announced a fourth oil discovery in its exploratory blocks in the Cambay basin on India’s west coast.
The energy giant had shed 6.5% over three previous sessions after its quarterly earnings lagged street forecasts.
Tata Steel, the world’s eighth-largest steel maker by output, climbed 1.3% after its European unit Corus said it would raise prices from 30 May.
Metals makers such as Sterlite Industries and Hindalco rose 1.3% and 0.8% respectively as based metal prices rebounded.
In the broader market, gainers were nearly double the number of losers on relatively volume of 381 million shares.