Markets end 1.7% up led by financials

Markets end 1.7% up led by financials

Mumbai: The BSE Sensex recovered for a second day, rising 1.7% on Thursday, with firmer global markets underpinning sentiment but investors were circumspect about euro zone debt woes and foreign fund withdrawals.

Financials led the gains after the market started shakily and traders said there was short covering before the expiry of monthly derivatives contracts on the National exchange.

Tata Motors raced 4.7% to Rs742.90, ahead of its results.

After the ma rket closed, the top vehicle maker posted a consolidated net profit of Rs2,571 crore ($544 million) for its financial year ended March, beating forecasts on rising sales and improved profitability of its Jaguar and Land Rover unit.

The 30-share BSE index rose 278.56 points to 16,666.40, with 26 of its components gaining, but is down 5.1% this month. The 50-share NSE index rose 1.7% to 5,003.10 points.

“It is difficult to predict what happens next. It depends on how things shape up globally," said Jigar Shah, vice-president of equity sales at brokerage Motilal Oswal. “The monsoon should be an important factor on the domestic front. Corporate results were more or less in line."

The annual rains, vital for farm and growth in Asia’s third-largest economy, have not advanced for the past six days but weather officials said it was still not a reason for worry.

Foreigners have withdrawn $2.3 billion from Indian equities so far in May in their biggest pullout since October 2008, as the deteriorating fiscal health in Europe prompted investors to dump riskier assets.

“We do not know whether the correction is over, but we do know that corporate earnings growth and corporate balance sheets are far healthier today than they were in 2008," BNP Paribas said in a note.

The benchmark index’s drop has been far less than the broader MSCI’s measure of Asian shares other than Japan that has lost 15% so far in May.

The People’s Bank of China said a Financial Times report that the State Administration of Foreign Exchange was concerned about its exposure to the euro zone debt crisis was groundless, soothing investor sentiment.

The Chinese central bank said Europe would remain one of China’s main investment markets and Beijing would support actions to help the European Union resolve its debt crisis.

Financials climbed on hopes for a pick-up in loan demand in an advancing economy.

Top lender State Bank of India rose 2% while rivals ICICI Bank and HDFC Bank climbed 1.1% and 3.8% respectively.

Oil & Natural Gas Corp rose 4.6%, ahead of results on Friday. Last month, a Reuters poll showed the state energy firm may report quarterly net profit jumped 58.5% on higher oil prices.

Top utility vehicle maker Mahindra & Mahindra extended gains for a second day after it agreed to buy 55% stake in electric car maker Reva, aiming to be a significant player in the global electric vehicle industry.

The stock rallied 1.8%, adding to gains of 0.6% on Wednesday.

Engineering conglomerate Larsen & Toubro, which is riding a surge in orders on the back of a pick-up in domestic growth, rose 1.7%.

Tata Steel, the world’s eighth-largest steel maker by output, reversed early losses of 2.3% and closed up 1.8%. The company had warned on Wednesday that rising raw material costs and the euro zone’s debt crisis could crimp profit growth.

“While we believe Tata Steel offers significant potential upside if one were to extend one’s investment horizon beyond three years, we are not comfortable valuing a cyclical commodity, such as steel, on an extended time frame," JPMorgan said in a note.

Energy major Reliance Industries, which has the highest weight on the Sensex, gained 1.4%.

The Economic Times reported the energy giant and Reliance Natural Resources Ltd will reach a gas supply agreement in the next two weeks, taking forward a patch-up between the billionaire Ambani brothers.

In the broader market, gainers outpaced losers in the ratio of 1.5:1 on relatively lower volume of 333 million shares.