Mumbai: Markets rose for the third straight session on Friday, as risk appetite returned globally on hopes policymakers will come up with more actions to combat the European debt crisis, helping investors shrug off a rate increase by the domestic central bank.
The outlook for local stocks, however, remained cautious as the Reserve Bank of India stuck to its hawkish stance. The RBI lifted its policy lending rate by 25 basis points, in line with expectations.
“It is clear that RBI has maintained its hawkish stance. It gives you a sense that RBI is not expecting anything positive to happen in a hurry” said Arun Kejriwal, strategist at KRIS.
“Our stock market is riding the global recovery and trying to make the most of it. How long this will remain, we have to see. It can fizzle out today, it can fizzle out tomorrow,” Kejriwal said.
The main 30-share BSE index closed up 0.34%, or 57.29 points at 16,933.83, with 13 of its components ending higher. Markets ended the week 0.4% higher, their third straight weekly gain, after falling for five consecutive weeks.
The index has fallen 17.4% since the start of 2011. Interest rate sensitive indices such as banking and real estate slipped into the red immediately after the rate action at noon. Both the BSE banking index and the real estate index recouped losses to end 0.59 and 1.26% higher respectively.
“Banking stocks should revive, there was fear of a 50 basis point rate hike, that has not materialised. And the stocks have been beaten down significantly,” said Sailav Kaji, director Institutional Equities & Chief Strategist, Padmakshi Financial Services.
The banking index has dropped 13% over the last two months. Top lender State Bank of India rose 2.51%, while ICICI Bank closed up 0.88%.
Tata Motors gained 7% after global sales of its Jaguar Land Rover rose 31% in August.
State-run explorer Oil and Natural Gas Corp closed 5.4% higher after it said it has deferred a follow-on share sale expected to raise as much as $2.5 billion.
Analysts said ONGC shares rose on short covering, as investors had expected the new shares to be issued at a discount The 50-share NSE index closed up 0.17% at 5,084.25 points. In the broader market, there were almost 1.2 losing stocks for every gainer. Volume was relatively strong at 795.5 million shares.
“Our markets have outperformed the global peers in the past few trading sessions on hopes of peaking out of the interest rate cycle and initiation of reforms. Efforts to stabilize the European economy also had a positive impact on sentiments,” said Dipen Shah, head-fundamental research at Kotak Securities.
He said the market will await developments in Europe and in the United States, where a Federal Reserve meeting will be keenly watched for more measures to boost the economy.
Global sentiment improved after coordinated action by major central banks around the world ensured European banks have access to dollar funding.
The MSCI’s measure of Asian markets other than Japan was up 2.11% and Japan’s Nikkei gained 2.25%.
MARG Ltd ended up nearly 5% after a unit of the engineering and construction firm raised Rs 200 crore from private-equity firm Ascent Capital for its south-east India based sea-port.
Prism Informatics , a software development firm, closed up 3.55% after it said it got multiple SAP projects from Sri Lanka’s Hemas. .
Hawkins Cookers Ltd closed up 3% after the kitchenware maker said a strike at one of its plants ended on Friday.