Mumbai: The main BSE index rose over 1% to their highest close since 11 July as improved US jobs data sparked a global risk rally, while private lenders such as HDFC Bank surged on hopes for government measures to help the mutual fund sector.
New finance minister Palaniappan Chidambaram promised on Monday to shortly unveil a path of fiscal consolidation, and said the government would announce measures to clarify tax laws and tackle investments into mutual funds.
The comments could provide a boost to domestic shares, though analysts cautioned markets remain wary after hopes for meaningful action have been previously dashed.
“It is just interesting to hear what he is saying, but there has to be real action. Concrete things should come than just words,” said Sudip Bandyopadhyay, CEO of Destimoney Securities.
“Till the time real action comes, I would not like to put my weight behind this.”
The 30-share BSE index rose 1.25% to 17,412.96 points. The 50-share NSE index gained 1.28% to end at 5,282.55 points.
Markets rose on Monday, led by gains in Reliance Industries, Tata Motors, Jaiprakash Associates and Kotak Bank.
Hopes for new measures from the recently-appointed finance minister come as a welcome relief, especially after better-than-expected US jobs data eased some of the concerns about the global economy that had dented demand for risk assets.
Indian stocks have stagnated since the start of July after hopes for policy reforms, which had helped push the BSE index up 7.5% in June, began to wane.
Analysts have warned a lack of meaningful measures could derail Indian stocks, especially as a summer drought threatens to hit rural consumption, while the Reserve Bank of India has kept interest rates on hold because of inflationary pressures.
Government measures could also sustain the foreign inflows into stocks. Overseas investors bought a net Rs 3,587 crore in Indian shares last week, their biggest since the week ended July 6.
Reliance Industries surged 5.9% after the Economic Times newspaper reported the energy conglomerate has agreed to share its accounts for its KG-D6 block with the government, raising hopes for an end to the stand-off between the two sides over the natural gas fields.
Private banks with significant mutual fund exposure held onto their earlier gains following finance minister Chidambaram’s comments on measures for the mutual fund sector.
Axis bank gained 2.2%, while HDFC Bank added 2.1%.
Balrampur Chini surged 6.6% after Jefferies upgraded the sugar producer to “buy” from “hold”, calling it the “best stock” to play the expected rise in sugar prices as production falls because of the summer drought.
Rival Wockhardt ltd rose 4.5% after the drug maker said it plans to redeem its last tranche owed to foreign currency bondholders by paying 2 billion rupees to its foreign currency bondholders, while also reporting April-June net profit doubled to Rs 378 crore.
Not all shares gained. Hindustan Petroleum Corp dropped 1.73%, after Brent September crude surged $3 a barrel on Friday following the US jobs data though prices retreated a tad on Monday.