Mumbai: India’s main stock index bounced 1.7% on Tuesday, as investors covered short postions a day after the market dropped 4.1% to its lowest close in a month.
Engineering and construction firm Larsen & Toubro, and leading financials such as ICICI Bank, HDFC Bank and Housing Development Finance Corp were among the major gainers.
Reliance Communications climbed 2.4% to Rs251.25 after two banking sources told Reuters the company had started talks to buy Kuwaiti Zain’s African operations, which media say are worth $10 billion.
Leading aluminium producer Hindalco Industries rose 6.1% to Rs106.35, after sliding 7.4% on Monday.
“Yesterday’s fall was pretty big, and so we are seeing a bounce back,” D D Sharma, vice president of retail research at Anand Rathi Financial Services, said.
“Some investors may wait for the market to stabilize a little more before booking profits again.”
The market is running out of steam after nearly doubling in five months and may be poised for a correction as investors grow wary of high valuations, a bad monsoon and looming inflation.
The 30-share BSE index ended up 1.69%, or 250.34 points, at 15,035.26, with 24 stocks advancing, after falling as much as 0.3% in early trade. The 50-share NSE index rose 1.6% to 4,458.90.
“It’s reasonable that there should be some short-covering in the market today after yesterday’s fall,” V.K. Sharma, head of research at Anagram Stock Broking, said.
“But we believe investors could go short again in the short term and the market could test lower levels once more.”
On Monday, the benchmark fell the most since a 5.8% drop on 6 July, when the government announced a budget that disappointed investors expecting bold economic and financial reforms.
A string of recent downbeat data has renewed doubts about a global economic recovery, and pushed down equity markets worldwide as investors fret about stocks that have risen ahead of fundamentals.
Weak monsoon - crucial for India’s domestic-demand-led economy - have added to the gloom. Deficient rainfall has pushed the country to the brink of drought, putting pressure on food prices and energy supplies and imperiling economic growth.
Some private economists have said poor rains could trim growth by as much as 2 percentage points in the fiscal year that ends in March. Traders say the market will be choppy until clarity emerged on the government’s response to the weak monsoon.
Larsen & Toubro rose 4.7% to Rs1,477.75, while top mortgage lender Housing Development Finance Corp advanced 3.1% to Rs2,321.05.
Private-sector ICICI Bank added 2.1% to Rs719.65, while rival HDFC Bank climbed 2.4% to Rs1,440.85.
In the broader market, gainers led losers 2 to 1 on relatively average volume of 403.3 million shares.
Asian shares were higher, with Japan’s Nikkei rising 0.2%, while MSCI’s measure of other Asian markets rose 0.3%.