Mumbai: Shares climbed 1% on Thursday, powered by gains in energy major Reliance Industries (RIL) and Tata Steel and helped by strong overseas markets.
But stubbornly high inflation, rising borrowing costs and the European debt crisis were concerns and investors were unconvinced the market could sustain the rise.
Tata Steel rose as much as 3.3% to Rs579.90 after the steelmaker reported late on Wednesday a sharp jump in its fourth quarter profit, beating estimates, helped by a one-time gain.
Goldman Sachs raised its 12-month price target for the world’s No. 7 steelmaker to Rs774 after the earnings from Rs761 and maintained its “buy” rating on the stock, citing possible benefit from price hike in Europe.
The main 30-share Bombay Stock Exchange (BSE) index was up 0.89% at 18,006.75 points by 12:02 pm, after having risen as much as 1.1%, with all but five of its components in the positive zone.
The 50-share NSE Index rose 0.85% to 5,394.65 points. In the broader market, gainers led losers in the ratio of 2.5:1 on a total volume of about 174 million shares on the NSE.
“We will keep seeing some value buying in some stocks that have fallen to attractive levels, but overall there are still significant headwinds in terms of rising inflation and crude prices,” said Neeraj Dewan, director at Quantum Securities.
Inflation remains a key worry for investors in India with the benchmark index falling more than 12% in 2011 and foreign funds pulling out $1.7 billion this month on concerns the Reserve Bank of India (RBI) will raise rates again to tame price rises.
The RBI has been one of the most aggressive central banks in tightening policy to tame stubbornly high inflation, raising rates nine times since March 2010.
“Unless we see some stability in inflation and crude prices the markets will continue to be very choppy,” Dewan said. “Monsoon is also going to be key for the near-term market outlook.”
Normal monsoon rain is crucial to India’s economy and boosts farm incomes and spending on for cars, motorcycles, consumer goods and even gold, which is used for investment.
The investor sentiment has also been hit by high oil prices. Brent crude futures rose above $115 a barrel on Thursday.
Worries about Europe along with fallout from a spike in volatility in precious metals and crude prices have also made investors scamper back and forth between shunning risky assets to scooping them back up.
The Greek government sought consensus on Wednesday for tough measures to exit the debt crisis as Greece’s EU commissioner warned that its euro membership was at risk if it failed to agree to sacrifices.
Beaten down Reliance Industries, which has the heaviest weight on the BSE index, rose as much as 2.4% to Rs927.60.
Citigroup said in a report dated Wednesday that Reliance’s current stock value had priced in lower gas volumes at its key block off India’s east coast, and the stock could see upside from the strong outlook for its core refining business.
The bank said it maintained its “buy” rating on the stock with a 12-month target price of Rs1,115.
Shares in Coal India was up 2.7% at Rs387.35 after the world’s largest coal miner posted a 13% rise in net profit for the fiscal year that ended in March.
Tata Motors rose 2.2% to Rs1,158.35 ahead of quarterly earnings. The company, which produces everything from the premium Jaguar and Land Rover brands to the world’s cheapest car, is expected to report 15% growth in its quarterly profit.
Asian stocks were on course for their biggest gain in a month on Thursday, led by resources and consumer sectors, with recovering commodity prices and the euro’s rebound toward $1.42 bringing investors back into the markets in search of bargains.
Stocks that moved
• Crompton Greaves rose 1.1% to Rs256.85 after the firm said it planned to build a power transformer plant in Brazil and had completed the acquisition of land through an overseas subsidiary.
• Bank of India was up nearly 1% at Rs433.70 after the lender said its board had approved raising funds by issuing 180 million fresh shares.
• Dhanlaxmi Bank gained 2.5% to Rs123.60 after the lender said it planned to raise up to Rs290 crore by way of preferential allotment of shares to private equity and institutional investors.