Mumbai: Indian shares rose 3% on Monday to their highest close in 5 weeks as a last-minute rescue seen for troubled US lender CIT Group and a raft of positive earnings fuelled global appetite for riskier bets.
Reliance Industries, controlled by billionaire Mukesh Ambani, led the gains after India’s highest court asked the energy giant and former group firm Reliance Natural Resources why a gas pact between the two should not be cancelled.
The government made a petition over the weekend to intervene in the case, arguing the gas was its property and the private pact between Mukesh and estranged younger brother Anil over the gas was not valid.
“If the government succeeds in making the gas-supply agreement null and void, Reliance Industries will be free to sell the gas at market prices,” Hitesh Agrawal, head of research at Angel Broking said.
“The market has sensed that the advantage is with Reliance Industries.”
Reliance Industries, India’s largest-listed firm with the most weight in the main index, rose 5% to Rs2,030.65. The company had challenged a lower court ruling to supply gas to Reliance Natural at a below-market price.
Reliance Natural, controlled by Anil Ambani, dropped 2.7% to Rs80.75. Group firms Reliance Infrastructure fell 1.2% to Rs1,135.85 and No. 2 telecoms firm Reliance Communications eased 1.1% to Rs270.
Tata Consultancy Services Ltd, the country’s top IT-services firm by sales, surged 15.3% to Rs500.10, its best one-day percentage gain, after it beat forecasts with a 22% rise in quarterly profit.
The news also sparked interest in other outsourcers, with No. 2 player Infosys Technologies gaining 5.7% to Rs1,972.70 and smaller rival Wipro climbing 7.1% to Rs460.05. All three stocks closed at their best levels in more than a year.
The 30-share BSE index ended up 3.03% or 446.09 points, at 15,191.01 points, its highest close since 12 June. Twenty-four of its constituents rose. The 50-share NSE index rose 2.9% to 4,502.25.
The benchmark had climbed 9.2% last week, the best among major markets in Asia - as the government raised hopes for financial reforms and monsoon rains, crucial to India’s domestic-demand powered economy, picked up after a weak start.
Several factors, including ample global and local liquidity, a recovery in earnings growth and strong corporate balance sheets, will spur the market over the next 12 months, Morgan Stanley analyst Ridham Desai said.
“Indian equities are in a sweet spot. We would continue to buy the dips in the market,” he said.
A spike in risk-appetite worldwide also underpinned the market, with record low global interest rates and trillions of dollars in stimulus spending appearing to help the world recover from the worst recession in 80 years.
A source close to the situation told Reuters US lender CIT Group Inc’s board signed off on a deal late Sunday for $3 billion in rescue financing from a group of bondholders, in a plan the lender hopes will stave off bankruptcy, further boosting sentiment.
The BSE index, which had tumbled 9.4% in the first week of July after the government’s budget disappointed investors looking for bold financial reforms, has bounced back and is up 57% this year after slumping by more than half in 2008.
The benchmark has leapt 89% from a 2009 low in early March, riding a stocks rally that has swept across the globe.
In the broader market, gainers led losers by more than 2 to 1 on relatively moderate volume of 445.6 million shares.
Asian shares rose to their highest since around the time of the collapse of Lehman Bros in September, with MSCI’s measure of Asian markets excluding Japan rising 3%. Japan’s Nikkei was closed for a public holiday.