Mumbai: Indian shares rallied 3.5% on Friday and took gains for the week to 9.2%, the best among major markets in Asia, as the government raised hopes for financial reforms.
Investor sentiment was also underpinned by improving global confidence after upbeat corporate results and economic data.
Private-sector lender ICICI Bank, outsourcer Infosys Technologies and top mortgage firm Housing Development Finance Corp led the gains, lifting the main index after it dropped 9.4% last week.
“A lot of god news is coming in. Monsoon rains which were weak are looking up, overseas markets are doing well, and the government is now talking reforms,” Jayesh Shroff, who helps manage $1 billion in equity at SBI Mutual Fund, said.
Last week, the benchmark index posted its biggest weekly fall in eight months, after the government’s budget offered little in terms of bold economic and financial reforms, but set a huge deficit of 6.8 percent of GDP, the highest in 16 years.
A late start to monsoon rains, crucial to India’s domestic-demand-led economy, had also worried investors.
But the monsoon has picked up, and Finance Secretary Ashok Chawla said on Friday the government would push reforms, including raising foreign investment limit in insurance companies and give equal voting rights to foreigners in private banks.
The 30-share BSE index ended up 3.47%, or 494.67 points, at 14,744.92 points, with 28 stocks advancing. The 50-share NSE index ended up 3.4% at 4,374.95.
It was biggest one-day percentage rise in seven weeks and the weekly gain was the best in nearly two months and the strongest performance among major Asian indexes tracked by Reuters.
There are still concerns about rich valuations and uncertainty surrounding the domestic economy and corporate earnings growth, but the momentum in overseas markets is spurring the benchmark higher, traders said.
Equities worldwide have rallied this week as strong results from firms like Goldman Sachs, JPMorgan, Intel and LG Electronics Inc, and encouraging economic data from China and Singapore signalled the turmoil in the global economy was abating.
But after an 83% jump from a 2009 low in early March, the BSE index now trades at 16.3 times one-year forward earnings, higher than benchmarks at other emerging markets.
Several Indian companies, including top telecoms Bharti Airtel, ICICI Bank, state-run explorer Oil and Natural Gas Corp and leading car maker Maruti Suzuki, are scheduled to report results next week, and disappointing results could hit the market rally, traders said.
“The results we have seen so far this week have been pretty good, and if that trend continues, things will be fine,” Shroff said.
“Any indication of financial reform from the government could also be a positive for the market.”
Reliance Industries, India’s largest-listed firm with the most weight in the main index, is expected to post a dip in quarterly profit on tighter refining margins.
ICICI Bank rose 6.8% to Rs742.45, while No. 2 outsourcer Infosys climbed 4% to Rs1,867.
Bharti Airtel, which is in exclusive merger talks with South Africa’s MTN, advanced 5.3% to Rs827.40.
Housing Development Finance Corp added 5.9% to Rs2,516.05.
In the broader market, gainers led losers by more than 2 to 1 on relatively moderate volume of 442.5 million shares.
Asian shares climbed, with Japan’s Nikkei rising 0.6%, while MSCI’s measure of other Asian markets gained 1.2%.
By 4:15pm, the FTSEurofirst 300 index of top European shares was up 0.5%.