Bangalore: Indian shares recouped early losses and climbed 0.6% on Tuesday, supported by better-than-expected economic growth and firm European markets.
Traders said improved growth prospects helped ease some of the gloom caused by a series of scandals that have hit some sectors and drove the market down. The main index shed 2.6% in November, its biggest monthly loss since May.
The economy grew 8.9% in the September quarter, faster than 8.3% forecast in a Reuters poll, boosted by robust farm output and manufacturing. Growth in the December quarter could be better, the chief economic adviser to the finance ministry said.
“It’s possible the market would hold on to these levels if there are no fresh revelations or new scams,” said Ambareesh Baliga, vice president at Karvy Stock Broking.
“We do not see a runaway rally from here because the overhang is still there, the bad taste of the scams remains.”
The 30-share BSE index erased early losses of nearly 1% and closed up 116.15 points, at 19,521.25 with 19 of its components rising. The 50-share NSE Nifty ended 0.6% higher at 5,862.7 points.
The benchmark had come within 100 points of a record high on 5 November, before sliding, with the market roiled by scandals - including issue of telecom licenses at low prices and a bribes-for-loans scam that saw eight financial industry executives arrested last week.
India may have been deprived of up to $39 billion by selling cellular licences too cheaply, and late on Monday the new telecoms minister vowed action against holders of 85 licences that may not have met eligibility criteria and others that have failed to meet rollout requirements.
Shares in property firm Unitech, which has a cellular joint venture with Norway’s Telenor, and Videocon, which was among the telecom licence holders named in a government audit, fell more than 6% in early trade.
The stocks later recovered and Unitech closed up 4%, while Videocon gained nearly 2%.
The real estate sector index also recouped early losses of 2.3% and rose 5.7%. DLF jumped 7% and Jaiprakash Associates rose 2.8%.
A Central Bureau of Investigation (CBI) source with direct knowledge of the matter said its probe in the bribes-for-loans case, in which the arrested include executives from public-sector lenders, would be widened further to look into other state banks.
The banking sector index initially eased 0.8%, before pulling back and ended up 1.2%. State Bank of India, the country’s leading lender, firmed 4%, while rival ICICI Bank lost 0.9% and Housing Development Finance Corp fell 0.7%.
In the broader market, gainers were more than double the number of losers on volume of about 421 million shares.
The main BSE index is up 11.8% so far in 2010, backed by net foreign portfolio investment of around $29 billion.
Elsewhere, leading European shares rose 0.4% by 3:56pm, while the MSCI’s measure of Asian markets other than Japan fell 0.7%.
Geometric Ltd rallied 8.4% after its chief executive told Reuters the software services firm expected margins to improve by 1-2%age points in the next 2-3 quarters and was in talks to buy a German firm.
Mahindra & Mahindra Financial Services Ltd gained 0.9% after the lender to rural and semi-urban areas said its board approved raising Rs570 crore through a stake sale to institutions.
Ispat Industries ended up 2.3% after the Economic Times reported ArcelorMittal may pick up a stake in the debt-laden Indian company. Patel Engineering gained 5.7% after the construction firm said it plans to raise up to 10 billion rupees by issuing securities to institutional investors.