Mumbai: The BSE Sensex rose the most in two weeks, bouncing 2.3% on Wednesday and tracking a rally in global equities as investors hunted for bargains after the main index fell to its lowest close in three-and-a-half months in the previous session.
However, dealers said the rebound may just be temporary, as withdrawals of foreign funds continued to weigh and the debt crisis in the euro zone persists.
Financials led the rally, rebounding from the sharp fall on Tuesday. The banking sector index rallied 1.8%, after declining 2.6% in the previous session.
The 30-share BSE index climbed 2.28% or 365.36 points to finish at 16,387.84 points after dipping below 16,000 on Tuesday for the first time since February. The 50-share NSE index rose 2.3% to 4,917.40 points.
Twenty-four of its components advanced.
”Today’s rally seems to be temporary. Nothing has drastically changed in the world between yesterday and today,” said Arun Kejriwal, director of research firm KRIS.
The index down 6.7% so far in May, as foreign funds pulled out nearly $2 billion from Indian equities as worries about the fiscal health of the euro zone prompted investors to shun riskier assets.
”The situation in Europe and Korea is still worrisome,” added Kejriwal.
Foreigners are still net investors of $4.6 billion in Indian equities so far in 2010. They had pumped in a record $17.5 billion in 2009, fuelling a steep 81% rally.
Top lender State Bank of India climbed 0.8%, while leading private sector rivals ICICI Bank and HDFC Bank gained 4.7% and 1.3%, respectively.
Mukesh Ambani-controlled energy giant Reliance Industries, which has the highest weight on the Sensex, rose 2.1% to Rs1,007.35.
Export-focused software companies recouped some of the month’s losses. The sector index jumped 3.5% on Wednesday, but is still down 4.7% this month on concerns euro zone woes could dent demand from the region.
Top outsourcer Tata Consultancy Services gained 5.4% while Infosys Technologies and Wipro rose 3.4% and 2.5% respectively.
Mahindra & Mahindra rose 0.6% as the utility vehicle maker announced on Wednesday it is buying a 55.2% stake in an electric car company.
Tata Steel, which was expected to release consolidated 2009/10 earnings after market hours, gained 1.2% to Rs484.45.
A Reuters survey of six brokerages had forecast a full year net loss of 25.7 billion rupees for the world’s eighth-largest steelmaker on net sales of 1.04 trillion.
Other metals firms such as Sterlite and Hindalco rallied 1.8% and 7.3% respectively as base metal prices firmed in Shanghai and London.
In the broader market, more than two shares advanced for every share that declined, in relatively subdued volume of 288 million shares.