Mumbai: Markets rose for the first time in five sessions and gained 1.4% on Monday, tracking world equities, while traders opted for large-cap bets as some of the companies under federal investigation in the bribes-for-loan scandal fell.
Eight executives from the public and private financial institutions were arrested by the Central Bureau of Investigation last week in the scandal, one of several to dog the government of Prime Minister Manmohan Singh and test India’s ability to crack down on corruption.
Shares of Money Matters, a company at the centre of the controversy, dived 10% and have lost nearly half the their market value since the news broke last week.
DB Realty, named in court documents filed by the CBI, plunged 6.5% although the company has denied any wrongdoing.
The CBI is looking into bad loan write-offs by some banks and financial institutions involved in the scandal, the Times of India newspaper said on Monday.
The 30-share BSE index rose 268.49 points, to 19,405.10 points, with 23 of its components advancing.
The 50-share NSE Nifty climbed 1.4% to 5,830 points.
“We bounced back today after the sharp decline last week. B ut then, there is definitely a slight dent in the image of Indian corporates in the near term,’ said Sanjeev Patni, president and head of institutional equities at Prabhudas Lilladher.
“In the long run, if fundamentals prove themselves, things would stabilise again.
The real estate sector recovered from early lows and closed 0.9% higher, while the banking sector index gained 1.4%.
The CBI said those arrested included the chief executive of LIC Housing Finance and senior officials at state-run Central Bank of India, Punjab National Bank and Bank of India.
LIC Housing erased early losses and added 1.7% as Kotak Securities raised the stock to “add” from “reduce,” saying it believes the recent price correction of the company’s stock already factors in business moderation.
Bank of India rebounded 6.2% as Bank of America-Merrill Lynch upgraded the stock to “buy” from “neutral,” dealers said.
Punjab National Bank closed 2.4% higher, while Central Bank shed 1.4%.
Hindustan Construction (HCC) closed 0.1% lower in a volatile session . It was the most traded major stock on the BSE with a volume of 15.3 million shares, more than 11 times its 30-day average volume.
HSBC Securities raised HCC to “overweight” from “neutral” on Monday, but lowered its target price to Rs 53 from Rs 68.5 earlier.
Separately, HCC’s Lavasa unit said India’s environment ministry acted “without jurisdiction” when it issued a notice asking for reasons not to shut down its town building project near the western city of Pune.
Energy giant Reliance Industries led the gains for the main index with a 3.7% rise, recovering from the recent underperformance.
“Whenever there is a reversal from a sharp decline, people look at large caps and known names as defensive bets,” said Patni.
The stock is down 8.4% year-to-date, while the main index gained 11.1%.
“The IT sector is looked upon as a defensive bet. They have not risen as much as some of other sectors like banking and healthcare this year,” said Prakash Diwan, head of institutional business at Networth Stock Broking.
Leading outsourcers Tata Consultancy Services, Infosys Technologies and Wipro rose between 0.8% and 2.4%.
In the broader market, declining shares and advancing ones were almost equal in number in relatively lower volume of 400 million shares.
Elsewhere, leading European shares edged 0.1% higher by 1020 GMT, while the MSCI’s measure of Asian markets other than Japan firmed 0.7%.