Mumbai: Indian shares climbed 0.6% on Friday and helped post their first weekly rise in three weeks, with banks leading the rebound as investors picked bargains after last month’s fall.
Gains in global stocks after the US Labor Department said initial claims for state unemployment benefit had dropped to its lowest level since early January also underpinned the market.
Tata Steel, the world’s No. 8 steelmaker, firmed 3.1% to Rs499.70, after steel sales at its Indian operations rose an annual 38% in October.
Banks were bolstered after Standard & Poor’s said on Thursday they would gain more than they would lose from tighter loan provisioning requirements.
Top lender State Bank of India rose 3.1%, its biggest rise in three weeks, to Rs2,204.20 and while rival ICICI Bank added 0.5% to Rs848.75 rupees.
The Reserve Bank of India (RBI) had said on 27 October banks must increase the minimum provision ratio for bad debts to 70% by September 2010.
State Bank and ICICI are still down 4.4% and 4.7% since 26 October.
S&P said the changes would boost banks’ provisioning cushions and bring coverage ratios in line with their major Asian peers.
“I think they (banks) are just catching up after lagging behind for a while. The pattern these days is when people find a laggard, people want to enter it at attractive levels,” said Rakesh Rawal, head of private wealth management at Anand Rathi.
“We have a positive long-term outlook for broader markets, and banks are likely to be amongst the major gainers,” he said.
The 30-share BSE index Sensex closed up 0.59%, or 94.38 points, at 16,158.28, taking gains in the week to 1.6%. Nineteen of its components gained.
The benchmark has risen 4.9% in the past three days, after sliding 8.4% over six sessions.
“Volatility will continue in the near term. Global cues are also not very clear,” Rawal said.
The index is up around 67% from the end of 2008, with foreign funds moving more than $14 billion into Indian equities this year.
Energy giant Reliance Industries closed 0.9% higher at Rs1,956.75, continuing its recovery. The stock fell abut 20% in 10 sessions from 20 October, hitting a three-and-half month low on Tuesday, but has since risen more than 7%.
“Although the next two months are likely to be volatile, for investors with a 12 month or longer-term view, the stock is attractively priced,” Neil Beveridge and Angus Chan, analysts with Sanford C. Bernstein, which has an ‘outperform’ rating on the stock, said in a note.
The sector index for public sector companies rose 3.9%, after the government on Thursday mandated more sales of shares by state firms and changed the rules on how it can use the proceeds, as it seeks to boost revenues and rein in a widening budget deficit.
State-run NMDC hit its upper limit of 10% while Steel Authority of India and Shipping Corp of India rose 1.3% and 2.5% respectively.
Engineering and construction firm Larsen & Toubro rose 2.2% to Rs1,575.70, after 4.2 million shares changed hands in a block deal at Rs1,566.30.
In the broader market, gainers outpaced losers in the ratio of 1.5:1 on relatively better volume of 421 million shares.
The 50-share NSE index Nifty closed 0.6% higher at 4,796.15.