Mumbai: Shares rebounded from last week’s fall and closed 0.8% higher on Monday, shrugging off the weakness in world equities, with financials leading the charge as investors placed their bets on improving credit demand.
Tata Steel gained 1.8% after the steelmaker reported better-than-expected quarterly earnings late on Friday on better demand and higher prices, and as Citigroup raised its rating on the stock to buy from hold.
The BSE 30-share index Sensex closed 0.76% or 152.80 points higher at 20,309.69 points, with two-third of its components advancing. It had declined 4% last week, its worst weekly performance since early May.
“I would not read much into last week’s fall. It was more of an opportunity than worry. It has just created room for upside,” said Rakesh Rawal, head of private wealth management at Anand Rathi.
The main stock index has gained 16.3% this year, backed by a foreign funds inflow of $28.5 billion into Indian equities in the period.
The MSCI’s measure of Asian shares other than Japan has grown nearly 12% year-to-date, outperforming the all-country equities index, which has risen 6.5% in the period.
Citigroup said Asian equities can rise 23% more before investors should think about owning fewer Asian stocks.
“The train has left the station but as yet has not arrived at the final destination,” Citigroup said in a note.
“As for Asia ex, someone forgot to close the top on either the Perrier or Champagne bottle since we still sparkle, but bubbling we are no more and not yet.”
Financials rallied on an optimistic demand outlook in a fast-expanding economy, and as monthly inflation eased slightly in October, which may allow the Reserve Bank of India (RBI) to keep rates steady in coming months.
“Credit demand has a direct correlation to economic growth. So, with the economy growing, banks stand to benefit,” said Rawal.
India should return to an average 9% growth rate in the near term, since most economic indicators suggest a pick-up, finance minister Pranab Mukherjee told reporters on Sunday.
The banking sector index firmed 2.4% after declining 2.9% on Friday.
Top lender State Bank of India firmed 4.4% while leading private lenders ICICI Bank and HDFC Bank gained 1.7% and 2.8%, respectively.
Reliance Communications declined 1.1% after the second-largest mobile operator reported a 40% drop in quarterly profit, smaller than expected but still its fifth straight quarter of falling profits.
According to provisional data, losers outnumbered gainers in a ratio of 1.4:1 in the broader market on volume of 468 million shares, more than 12% higher than the 30-day average volume.
The NSE 50-share index Nifty rose 0.8% to 6,121.60 points.
Meanwhile, stocks elsewhere in Asia and Europe were in the red on fears that Ireland may be forced to seek a financial rescue package.
The FTSEurofirst 300 index of leading European shares was down 0.2% by 1003 GMT while MSCI’s measure of Asian shares ex-Japan dropped 0.6%.