Mumbai: Indian shares climbed more than a percent on Monday to their highest close in nearly a month, with energy giant Reliance Industries and banks such as State Bank of India and ICICI Bank powering the rise on optimism about the economy.
Asia’s third-largest economy could expand between 6 and 7% in the year to March 2010 despite a bad monsoon, the finance minister said on Saturday.
“The effort now is to bring the economy back on the growth path of 9% per annum,” Pranab Mukherjee said without giving a time frame.
Traders said banks would be a beneficiary as demand picks up and companies begin to invest in expansion projects. An improving economy would also lower the risk of consumer defaults, they said.
“We are positive on SBI and ICICI Bank as their long-term growth story is intact,” said Jigar Shah, vice-president of equity sales at Motilal Oswal. State Bank, the country’s largest lender, rose 2% to Rs2,344.65 while rival ICICI gained 1% to Rs918.85.
Reliance Industries, which has the highest weight in the main index, rose 1.5% to Rs2,147.75, ahead of its annual general meeting on Tuesday.
The 30-share BSE Index rose 1.09%, or 183.68 points, to 17,032.51 points, its best close since 20 October. Twenty-six of its components ended in the green. The 50-share NSE index closed 1.2% higher at 5,058.05.
“Positive global cues and asset allocation are helping our market,” Shah said. ”When there is a view built up that the future is better, people do not mind buying at higher valuations.”
The benchmark rose above 17,000 for the first time since 23 October and is up more than 7% this month, after shedding 7.2% in October in its worst monthly performance in a year.
Foreign funds have been a driver for the market, ploughing in nearly $15 billion so far in 2009. The inflow has lifted the index more than three-quarters in the period.
Metals producer Sterlite Industries added 3.6% to Rs867 after a US federal judge issued a ruling supporting a bid by rival Grupo Mexico for Asarco LLC.
Morgan Stanley said the decision may remove confusion related to Asarco and bring focus back to Sterlite’s more lucrative initiatives, especially in India.
The development also frees up cash that can be utilized for its new projects, it said in a note.
“We believe investors would also appreciate in the medium term, that Sterlite should be better off not having Asarco assets than having bought the same at a price higher than $2.2 billion (Sterlite’s penultimate bid),” Morgan Stanley said.
Top vehicle maker Tata Motors (TAMO.BO: Quote, Profile, Research) climbed 2.3% to Rs633.90 after the Financial Times said Jaguar Land Rover was expected to announce it secured a 170 million pound working capital facility from GE Capital.
Leading carmaker Maruti Suzuki firmed 5.5% to Rs1,560.40 on robust volume outlook.
“With macro environment improving, there are catalysts in form of improving product mix, lower raw material cost and higher operating leverage which would drive profitability and earnings growth for the company,” Motilal Oswal said in a note.
Export-focused software firms dropped as the rupee firmed to its strongest against the dollar in nearly a month.
Top software services company Tata Consultancy shed 1% and rival Infosys Technologies lost 0.3%. Wipro bucked the trend and closed 0.6% higher.
In the broader market, gainers outnumbered losers in a ratio of 1.8:1 on relatively lower volume of 342 million shares.