Mumbai: Shares rose more than 1.2% in early trade on Tuesday, bolstered by gains elsewhere in Asia as investor worries about Europe’s deepening debt woes paused briefly after a report that Italy could get financial support from China.
Steady gains across US and Asian markets prompted broad-based short covering in India -- especially in shares of software exporters such as Tata Consultancy Services and Infosys , and financial stocks.
By 10:50am, the benchmark 30-share BSE Sensex was up 1.2% at 16,695.67 points, after having fallen in the previous two sessions. Only four of its components were trading in negative territory.
“This is more of a short-covering rally, rather than investment. But short covering is always a first step ahead of delivery-based buying,” said Gajendra Nagpal, chief executive at Unicon Financial Intermediaries.
“We have to see if these gains can sustain for a day or two, or if the rally peters out,” he added.
Earlier on Tuesday, Asian stocks rose and the euro edged off a seven-month low after a report that Italy may get financial support from China sparked a bout of short-covering.
Japan’s Nikkei was up 1.1%, while the MSCI’s measure of Asian markets other than Japan was trading up 0.15%.
Shares of Indian software exporters, beaten down in recent weeks, recovered on hopes that lower uncertainty in the key U.S. and Europe markets may prompt clients to speed up decisions on technology spends.
Tata Consultancy Services rose 2.6%, while smaller rivals Infosys and Wipro added 2.1% and 2.2%, respectively. The sector index , down 30% so far this year, rose 2.2%.
Banking shares also gained on hopes the central bank will pause its 18-month long monetary policy tightening after one more rate rise this week, after India’s industrial output growth slumped to 3.3% in July.
“There is definitely a feeling that we may be reaching the peak of the interest rate cycle, and that interest rate worries may be going away,” Nagpal said.
Largest lender State Bank of India rose 1.4%, while private sector rivals ICICI Bank and HDFC Bank rose 1.7% and 0.6% respectively. Mortgage lender HDFC rose 1%.
Shares in non-ferrous metals producers Sterlite Industries and Hindalco were up nearly 2% each after copper prices rose on the London Metal Exchange.
Oil and Natural Gas Corp , due to launch a follow-on share sale next week, bucked the trend, slipping 1.1% to 258 rupees.
Largest-listed real estate firm DLF rose 3% to 200.90 rupees after the Economic Times reported the company may raise as much as 40 billion rupees ($850 million) from sale of a key Mumbai land plot. A DLF spokesman declined to comment.
In the broader market, 1,042 advances led 285 declines on moderate volume of 184.3 million shares.
The 50-share NSE index was up 1.2% at 5,006.80 points.
Biotechnology firm Biocon rose 1.8% to Rs 333.50 after its head said the firm plans to list its research services unit Syngene within the next 18 months.
KS Oils rose 16.4% after the Economic Times reported it was in talks to sell its wind power business, citing a person familiar with the transaction. Company officials were not available for comment.
On Monday, its board had approved an investment of Rs 250 crore through issue of warrants or shares to investors or founders.