Mumbai: Indian shares rose for a second day rallying 1.6% on Tuesday, as easing concerns about the Dubai debt crisis and robust November automobile sales boosted investor confidence on the growth outlook.
The market, which had climbed 1.8% on Monday after a surprisingly strong 7.9% economic expansion in the September quarter, was also helped by higher world markets.
Tata Motors leapt to an 18-month high of Rs708 as investors bet the country’s top truck maker that also produces cars would be a key beneficiary as the economy picks up steam.
Leading car maker Maruti Suzuki, majority owned by Japan’s Suzuki Motor Corp, raced 1.7% to Rs1,588.15 after it posted a 67% jump in November sales from a year earlier.
Tata Motors, which is set to release November sales later, ended up 6% at Rs700.75.
“We expect Tata Motors to benefit significantly from the revival in sales in the domestic and developed markets on the back of a macro economic recovery,” Macquarie Capital Securities said in a report.
The brokerage upgraded the stock to outperform from underperform, and set a 12-month target price of Rs789.
The 30-share BSE index closed up 1.61%, or 272.05 points, at 17,198.27, with 27 of its components gaining.
Following the strong September quarter expansion, the economy could grow 7% this fiscal year, with industrial output and services offsetting an expected decline in farm output, a top government official said.
“The latest numbers do indicate that industry and services are growing very strongly,” C. Rangarajan, chairman of the prime minister’s Economic Advisory Council, told reporters in New Delhi.
“This could go to offset to a very large extent the impact of the decline in agricultural production.”
Ratnesh Kumar, CEO of institutional equities at Anand Rathi, said the market was also helped by the realisation that India don’t really have a direct impact from the Dubai crisis.
The benchmark has rallied more than 78% in 2009, with foreign funds pumping in more than $15 billion.
“Liquidity flows are strong from foreign funds and domestic insurance companies. But there is a valuation challenge, as earnings upgrade have not been as fast,” said Kumar.
India’s manufacturing activity expanded for the eighth straight month in November but at its weakest pace since March due to a slowdown in growth of output, new business and employment, a survey showed.
The HSBC Markit Purchasing Managers’ Index (PMI), based on a survey of 500 companies, fell to 53 in November from 54.5 in October.
Energy giant Reliance Industries rose 3.3% to Rs1,097.85, after it had slid 4.4% over two days last week when Dubai’s debt woes hit the world markets.
Banks logged strong gains, after the robust GDP data reaffirmed investor faith in the growth story for the sector, dealers said.
Top lender State Bank of India and rival ICICI Bank rose 2.4% and 2.6% respectively.
Metal stocks moved up on firm metal prices, dealers said.
Sterlite Industries firmed 3.2% while Hindalco climbed 2.9%.
Leading motorcycle maker Hero Honda Motors rose 0.3% after it said November sales grew 32% from a year earlier.
Mahindra & Mahindra, the No. 1 tractor and utility vehicle maker, jumped 4.8% to Rs1,078 as its sales soared 96%.
The stock was also supported by the company’s deal with BAE Systems to create a land systems focused joint venture defence company in India.
In the broader market, gainers led losers in a ratio of 2.8:1 on relatively moderate volume of 400 million shares.
The 50-share NSE index closed up 1.8% at 5,122.