Markets end 2% higher led by Reliance, banks

Markets end 2% higher led by Reliance, banks

Mumbai: Indian shares climbed 2.1% on Monday, extending a winning streak to a fourth consecutive session, with Reliance Industries leading the way after a newspaper said the energy giant was close to an overseas buy.

Firmer global stocks after the Group of 20 pledged to keep stimulus in place until there was assured recovery, after data showed the US unemployment rate rose to a 26-year high also helped sentiment.

Reliance, which has the most weight in the main index, rose 3.5% to 2,024.55 rupees after the Economic Times reported it was close to a nearly $6 billion overseas acquisition and the likely target was the assets of bankrupt petrochemicals firm LyondellBasell.

“It would be a good buy at a time when the world braces for recovery," said Prayesh Jain, a research analyst with India Infoline. “Reliance has a huge cash pile and is comfortable with the leverage position. If this acquisition does happen, it will not really burden its balance sheet," he said.

The 30-share BSE index closed up 2.11 %, or 340.44 points, at 16,498.72, its best close in two weeks. Twenty-five of its components advanced. The 50-share NSE index closed 2.1 % higher at 4,898.40.

“There is a lot of speculative buying happening, with positive global cues supporting," said Ambareesh Baliga, vice-president of Karvy Stock Broking.

“But, the worry is the valuations are expensive. The correction we saw recently was warranted," he said.

State Bank of India rallied 5.2 % to Rs2,318.55, after the top lender said it had entered into an agreement with T. Rowe Price to sell a 6.5 % holding each in UTI Asset Management Company and UTI Trustee Company.

Private lender ICICI Bank firmed 4.7 % and HDFC Bank rose 4.1 %.

The benchmark index has risen 71 % since the end of 2008, powered by foreign fund inflows of more than $14 billion.

On Sunday, the finance minister said the timing for winding down stimulus measures would be decided when it was apparent the economy is recovering, but there would be no more stimulus measures.

Prime Minister Manmohan Singh said on Sunday growth in the next fiscal year, assuming a normal monsoon season, was expected to be more than 7 % compared with a 6.5 % forecast for the 2009/10 fiscal year.

In the broader market, gainers outnumbered losers in the ratio of 2.7:1 on a relatively moderate volume of 361 million shares.

Telecom stocks fell as the sector outlook remained weak after disappointing quarterly results and a deepening price war, analysts said.

Bharti Airtel fell 3.9 % to 307.50 rupees while rival Reliance Communications was down 2.2 % at Rs174.10.

Bharti chief executive Manoj Kohli said industry-wide average revenue per user (ARPU) would continue to fall on rising competition, but the ongoing price war was only a short-term phenomenon.

On Sunday, chairman Sunil Mittal said the company was not actively seeking acquisitions.

Cigarette to hotel business ITC raced 3.9 % while personal care products maker Hindustan Unilever shed 0.7 %, after Morgan Stanley added ITC to its focus list and removed Hindustan Unilever from the same.

Hozefa Topiwalla, analyst at Morgan Stanley, said ITC was in a strong position in one of the most attractive cigarette markets in the world and was demonstrating strong pricing power. He recently upgraded ITC to overweight from equal-weight.