Close: Sensex back in positive terrain, up 290 points

Close: Sensex back in positive terrain, up 290 points

Mumbai: Indian shares crawled back 1.9% on Friday after a four-day fall, but ended the week down 1.5% as worries about a weak monsoon and concerns equity markets had outpaced a global recovery kept investors wary.

A late revival in rains has boosted depleted hydropower and irrigation reservoirs and helped the soybean crop, but the overall farm outlook remains gloomy after three months of patchy rains and food prices are soaring.

This threatens to crimp demand for companies such as automakers and consumer-goods firms in the crucial rural sector.

“The next corporate results, which were expected to be good, will now be impacted by the weak monsoon," said A.N. Sridhar, fund manager at Sahara Mutual Fund.

“The market is now fairly valued. Till the next quarterly results, the market is likely to be choppy and move in a narrow range."

Engineering and construction firm Larsen & Toubro rose 3.5% to Rs1,568.55, and top mortgage firm Housing Development Finance Corp gained 3.3% to Rs2,461, leading the main index higher.

Energy giant Reliance Industries, which has the most weight in the main index, climbed 2.5% to Rs1,980.90.

The 30-share BSE index ended up 1.89%, or 290.79 points, at 15,689.12, with 28 stocks advancing, after briefly turning negative during trade.

“There is also a lot of liquidity in the system, and that is why we are seeing a pullback after every dip," Sridhar said. “From a longer-term perspective, India is seen as a better prospect than other markets."

Profit-taking in equity markets worldwide had dragged down the index 3.3% during the first four days of this week, its longest losing run since mid-July, after it rallied in the previous seven sessions.

The benchmark has leapt 95% from a 2009 low in early March on hopes of a recovery in domestic and global economic conditions, and is up almost 63% this year after slumping by more than half in 2008.

But this has made valuations expensive, with the BSE index trading at 17.1 time forward earnings, higher than benchmarks in other emerging markets such as Brazil, South Korea and Indonesia that trade at multiples of 12.5 to 13. Russia trades at just 7.3 times forward earnings.

Top utility vehicle maker Mahindra & Mahindra added 6.2% to Rs863.90, diversified cigarette maker ITC firmed 2.8% to Rs233.15 and state-run explorer Oil and Natural Gas Corp climbed 3.1% to Rs1,177.75.

Top power-equipment maker Bharat Heavy Electricals advanced 0.7% to Rs2,212.75 after its chairman told Reuters it expects to tie up orders worth about $2.5 billion in the next 4-6 weeks as private firms step up investment in the power sector.

In the broader market, gainers led losers 1,593 to 1,161 on relatively moderate volume of 466.9 million shares.

The 50-share NSE index rose 1.9% to 4,680.40.

Asian shares were mixed, with Japan’s Nikkei falling 0.3%, while MSCI’s measure of other Asian markets rose 1.3%.

At 1036 GMT, the FTSEurofirst 300 index of top European shares was up 0.8%.

Economic data from several countries including the United States have produced some upbeat news, indicating that a recovery from the deepest global downturn since World War II is slowly gaining traction.

But some analysts are worried the recovery leans too heavily on expensive government efforts, and that investors have gotten ahead of themselves in pricing in a recovery.

“Even though there is a rise today, there is not much conviction," Ambareesh Baliga, vice president at Karvy Stock Broking, said. “There are no triggers to lead the market significantly higher."