Mumbai: Shares rose 0.8% on Monday to test a fresh 2-“ year high, with financials leading the charge, supported by firm world equities.
Financials marched ahead as investors placed bets on optimistic outlook for loan demand in the world’s second-fastest growing major economy after China.
Leading lender State Bank of India rose 1.1% while top private sector lender ICICI Bank climbed 3%. Mortgage lender Housing Development Finance Corp gained 1.5%.
State Bank of India plans to hit the market with a rights issue of about Rs20, 000 crore likely in the fiscal quarter ending March 2011, two sources with direct knowledge of the matter told Reuters.
The 30-share BSE index closed 0.79% or 143.51 points higher at 18,287.50, with 27 of its components closing in the green. It gained as much as 0.9% to 18,309.25 points, its highest level since February 2008.
“It (the rise) is all on the basis of hopes and expectations rather than actual events,” said Arun Kejriwal, director of research firm KRIS.
“Profit booking is likely as we are back at the higher levels.”
The benchmark index gained 4.7% so far in 2010, driven by $11 billion of foreign fund flows into the local stock market.
Foreign funds had poured in a record $17.5 billion in 2009, which had helped the benchmark index rally 81%.
For the year to date, it has outperformed MSCI’s world equity index which has shed 0.9% and emerging markets index which firmed 2.2%.
Advancing shares thrashed declining ones in the ratio of 1.9:1, in a relatively moderate volume to 440 million shares.
The 50-share NSE index climbed 0.9% to 5,486.15 points.
Export-oriented software companies, which were dragged lower on a knee-jerk reaction to news that the US Senate’s vote to increase visa costs would hit margins, recouped early losses.
“The increase in visa costs would not make a big impact on IT companies’ margins. Their fundamentals remain strong,” said Shashi Bhusan, senior research analyst at brokerage Prabhudas Lilladher.
Top outsourcer Tata Consultancy climbed 1.4% while peers Infosys and Wipro rose 0.3% and 0.8% respectively.
Tata Motors continued to rise, on expectations the vehicle maker may post robust June-quarter results on Tuesday. It jumped nearly 3% to Rs920.80 intra-day, to test a fresh 3-“ year high.
The vehicles maker is expected to swing to a net profit of Rs980 crore for the June quarter from a loss of 3.3 billion rupees a year ago, a Reuters poll showed.
Tata Motors closed 2.8% higher at Rs918.95 while top car maker Maruti Suzuki gained 0.9% to Rs1,232.45.
Car sales in India rose an annual 38% in July, as a near-normal monsoon held out prospects of good economic growth and a fall in food prices, boosting customer sentiment.
Energy major Reliance Industries, which has the heaviest weight on the index, dropped for the fourth straight session on concerns over delay in ramp up of gas production and that new projects may take time to accrue benefits.
The stock closed 0.7% lower at Rs993.65, its lowest close since 25 May.
MSCI’s broader world equity index was up 0.3% by 1025 GMT. The FTSEurofirst 300 index rose 1.3% while more volatile emerging stocks index added 0.5%.
Growing speculation the US Federal Reserve will have to buy bonds sooner rather than later, to bolster the sagging economy also lent support, ahead of the Fed’s meeting on Tuesday.