Mumbai: Shares ended up 1.9% on Tuesday to their highest close in over two and a half months, as carmakers, infrastructure firms and developers cheered the possible end of a monetary tightening cycle that has hurt demand in Asia’s third-largest economy.
The Reserve Bank of India raised interest rates for the 13th time since early 2010 to battle stubbornly high inflation but signalled it may end its hawkish stance that has put it at odds with peers concerned about weak global growth.
“Markets are up on the fact that this is probably the last hike from the RBI and what it has said about being sympathetic to growth,” said Abhishek Patel, equity analyst at ITI Securities.
“On top of that, global markets have rallied recently, and there is good news expected from Europe. Indian markets have joined in the positive sentiment.”
The main 30-share BSE index closed up 1.86% to 17,254.86 points, its highest close since 5 August. Only three of its components closed in the red.
Stock markets will open for a 90 minute special trading session on Wednesday at 4:30pm. The markets will be closed on Thursday on account of the annual Diwali holiday.
European policymakers appear to be inching towards a deal on bank recapitalization and rules for using the European Financial Stability Facility (EFSF), driving gains for India’s IT stocks for a second consecutive day.
The country’s flagship IT sector has been looking to increase its sales in Europe, its second-largest export market, to hedge against U.S. exposure.
Infosys , India’s second-largest software services firm, and a bellwether of the country’s $76 billion IT industry, closed up 3.3% at 2,858.70 rupees ($57.38), having risen as much as 4.8%.
Tata Consultancy Services , the market leader, closed up 1.8% at 1,098.65 rupees, with rival Wipro ending the day at 372.15 rupees, a gain of 3.9%.
Automakers, who have been hit with a slowdown in demand over the past quarter caused by the high cost of borrowing, saw their shares rise after the central bank said in a statement the likelihood of a rate move in December is “relatively low.”
Maruti Suzuki , India’s largest carmaker, closed up 3.5% at 1,151.25 rupees, with rivals Mahindra & Mahindra and Tata Motors posting gains of 5.4% and 3.0% respectively.
Banking stocks , the biggest contributor to the benchmark Sensex index, fell as much as 3.1% after the Reserve Bank of India (RBI) deregulated savings bank deposit rates alongside the widely expected 25 basis point hike.
Larger banks are likely to be the hardest hit by the deregulation, Deutsche Bank said.
HDFC Bank and State Bank of India , the country’s largest lender, were the biggest%age fallers in the benchmark index. HDFC closed down 3.4 pct at 468.00 rupees, while SBI slipped 3.6% to end at 1,839.80 rupees.
The 50-share NSE index closed up 1.83% at 5,191.60 points, slightly below its session high. In the broader market, roughly the same number of stocks gained as fell, on a volume of about 664.4 million shares.
At 1007 GMT, the FTSEurofirst 300 index of top European shares was up 0.10%. World stocks, as measured by the MSCI world equity index were up 0.16%.
Shares in non-ferrous metals producer Sterlite Industries , a unit of London-listed Vedanta Resources , rose as much as 5.2%, buoyed by a continued rise in Shanghai copper futures.
Titan Industries fell as much as 6.7% after the company reported a lower-that-expected 16% rise in its September-quarter net profit at 1.48 billion rupees.
Shares of Dr.Reddy’s Labs rose as much as 3.0% after the US Food and Drug Administration approved its generic version of Zyprexa medicine, and its second-quarter net profits beat expectations. .