Mumbai: Indian shares rose 0.5% on Monday to their highest close in 20 months on the first trading day of 2010, with auto majors Mahindra & Mahindra and Tata Motors rallying on robust December sales.
Investor sentiment was also upbeat after a survey showed the rate of growth in Indian manufacturing rose for the first time in three months in December, with activity reaching its highest since May on sharp rises in new work and output.
Asia’s third-largest economy is expected to grow at more than 7.5% in the fiscal year ending March, boosted by better growth in the December quarter, the finance ministry’s chief economic advisor, Kaushik Basu, said.
Trading volume was strong and swelled to 567 million shares. Traders said this was in line with the trend on new year trading and was partly due to an early start time that kicked off on Monday.
“Reliance block deals also contributed to good volumes in early deals,” said Deven Choksey, managing director and CEO of KR Choksey Shares.
Energy giant Reliance Industries raised $577 million through block sales of treasury shares, as it looks to buy bankrupt petrochemicals firm LyondellBasell.
The move by India’s leading two stock exchanges to start trading at 9 am, 55 minutes earlier than the previous opening, invited criticism from market participants and was deferred to 4 January from 18 December.
“It has been a trouble for everyone to reach early and it is going to be a drag. Over a period of time, may be we will get used to it,” said R. Ganesh, director of Systematix Shares.
“I am not too happy about it. But anyway, it is a part of life,” he said.
Choksey said the early start would help boost trade in the long run, but in the short run the higher cost for brokerages may not be offset by commensurate gains.
The 30-share BSE index Sensex closed up 0.54%, or 93.92 points, at 17,558.73, its highest close since 2 May 2008. Twenty-three of its components advanced.
Leading utility vehicle maker Mahindra & Mahindra hit an all-time high of Rs1,138 after it said December sales more than doubled from a year earlier.
It closed 4.5% higher at Rs1,129.60.
Top vehicle maker Tata Motors raced 4.4% to Rs827.40 after it reported a 105% jump in December sales from a year earlier.
The stock rallied to Rs830.25 in early deals, its highest level since February 2007.
Reliance, which has the heaviest weight on main index, ended down 1.3% at Rs1,075.35 after falling as much as 6.2% at one stage following the block sale at a discount to the previous close.
Banks and financial stocks firmed as investors were optimistic on the long-term growth prospects for the sector.
“We expect the overarching story in India this year to be of re-leveraging and the return of risk-taking, as a combination of easy capital and capacity shortages work to create an ideal platform for the investment cycle to take off,” Nomura said.
“We believe that investors should use this opportunity to buy into the Indian market,” it said in a note and recommended domestic cyclicals such as banks, construction and real estate sectors.
Top lender State Bank of India rose nearly 1% while ICICI Bank climbed 0.4%.
Cement makers ACC, Grasim and Jaiprakash Associates climbed between 2.7 and 4.9% on expectations for a price hike and mostly higher shipments for December.
In the broader market, gainers led losers in a ratio of 2.8:1.
The 50-share NSE index Nifty closed 0.6% higher at 5,232.20.