Mumbai: Indian shares rose 0.9% on Monday, powered by Reliance Industries after the energy major’s offer to buy a controlling interest in US-based bankrupt petrochemicals company LyondellBasell.
Investors cheered the bid, which comes when global asset prices are cheap after the financial crisis. A deal would catapult Reliance into the ranks of top petrochemical makers such as Saudi Arabia’s SABIC, Germany’s BASF and US-based Dow Chemical Co.
Sources have put the value of the cash offer at around $10 billion to $12 billion, which would make it India’s second-biggest ever foreign takeover. In 2007, Tata Steel bought Corus for $13 billion.
“In deals like Tata-Corus, the valuations were phenomenally high. But when a company is down and out, it is going to be cheap,” said Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services, who has bought the stock for his clients.
Reliance, which has the heaviest weight in the main index, climbed 3.3% to 2,195.50 rupees, its highest close in more than five weeks.
Vaibhav Sanghavi, director of Ambit Capital, said Reliance’s comfortable balance sheet and synergies also helped the stock.
The 30-share BSE index firmed 0.93%, or 158.33 points, at 17,180.18, its best close in more than a month. The 50-share NSE index closed 1% higher at 5,103.55.
Two-thirds of its components ended up, while in the broader section gainers led losers in the ratio of 1.3:1 on relatively lower volume of 348 million shares.
The index, which has gained 8.1% this month after shedding 7.2% in October, is up more than 78% in 2009, fuelled by foreign portfolio inflows of more than $15 billion.
Telecom stocks declined as a tariff war in the sector intensified after Tata Teleservices extended its per-second billing scheme to roaming calls.
The telecom regulator said on Friday India would introduce mobile number portability on 31 December, and the switching charges for users must not exceed Rs19.
“Telecom stocks are bleeding more as the pricing war is worsening with its extension to roaming calls,” said Ambareesh Baliga, vice-president at Karvy Stock Broking. Also, with mobile number portability, the question now is how do you hold back your customer.“
Top mobile operator Bharti Airtel fell 4.5% to Rs275.80, while rival Reliance Communications shed 1% to Rs172.05.
Shares of export-focused outsourcers were pulled down by an appreciating rupee. Bellwether Infosys Technologies eased 0.8% and Wipro lost 0.6%.
Cigarette-to-hotel group ITC struck an all-time high of Rs270.20 on good business outlook, analysts said. It ended up 3.5% at Rs269.15.
“If we break the resistance level of 5,180 we can move higher, but there are chances of cautious stance by investors as we move up,” said Baliga.