Mumbai: Indian shares climbed 0.5% on Tuesday and hit their highest level in 31 months for the second day, bolstered by rising foreign investor interest in the fast-expanding economy.
Overseas funds have poured $13.1 billion into Indian stocks this year, adding to net inflows of a record $17.5 billion in 2009, and traders said the buying was underpinning the market.
Cement stocks were among the big gainers on speculation companies were likely raise prices, with construction activity set to pick up after the monsoon season ends.
The 30-share BSE index closed up 0.46%, or 85.01 points, at 18,645.06 points, with 19 of its components advancing. It hit 18,711.20 during trade, which was its highest since February 2008.
“I expect a 3% to 5% upside,” said Neeraj Dewan, director of Quantum Securities. “However, we may see bouts of profit booking, but there is nothing really negative to drive the market to a big correction.”
Energy giant Reliance Industries, which has the highest weight on the main index, rose 0.9% to Rs961.85.
ICICI Securities upgraded the stock to buy from hold, citing reasonable valuations and as most negatives were priced in.
“What is really striking is Reliance seems to be now participating in the broader rally,” said Dewan. “If that continues, it has the capacity to drive the index higher.” The stock has underperformed the market in recent months, and is down 11.7% in the year to date.
Cement maker ACC rallied 6.7%, its biggest rise in more than 15 months, while UltraTech and Jaiprakash Associates firmed 7.7% and 1.7% respectively. Top engineering and construction firm Larsen & Toubro rose 2.3%.
Deven Choksey, managing director and CEO of KR Choksey Shares, said there was sector rotation taking place with investors opting for stocks such as Tata Motors and Maruti Suzuki. Tata Motors, the country’s top truck maker, rose 0.3%, while leading car maker Maruti Suzuki added 1.1%.
Reliance Communications closed 0.1% higher but trading was choppy after Emirates Telecommunication said it does not expect a deal with India’s second-largest mobile carrier in 2010.
Earlier, BNP Paribas Securities lowered its target price on the share to 140 rupees from 175, while retaining its reduce rating.
Leading outsourcers Tata Consultancy Services and Infosys Technologies gained 1.9% and 0.9% respectively. The Economic Times reported that nationalised Dutch bank ABN AMRO was set to renew contracts worth $1 billion with IBM and Tata Consultancy and Infosys.
Rising shares outpaced declining ones in a ratio of 1.3:1 on higher volume of 536 million shares.
The 50-share NSE index firmed 0.5% to 5,604.
Elsewhere, leading European shares were down 0.6% at 3:49pm while the MSCI’s measure of Asian shares other than Japan shed 0.4%.
Hospital operator Fortis Healthcare rose 0.8% to Rs162.80, extending Monday’s gains after a company official said it was looking to list a real estate investment trust in Singapore in the next six months.
Power transmission contractor KEC International firmed 1.7% to Rs494.55 after it signed a $95 million agreement to acquire SAE Towers Holdings from a unit of US-based private equity firm, Acon Investments.
Man Industries climbed 1.7% to Rs105.55 after the steel pipe maker said it won orders worth Rs1200 crore.