(Reuters) - The BSE Sensex rose for a fourth consecutive session on Thursday to its highest close since May 7, riding a global rally on continued expectations monetary stimulus at home and abroad would spark a recovery in risk assets.
would cut interest rates on June 18, at a time when global investors are betting the Federal Reserve will ease monetary conditions for the U.S. economy.
In a surprise move, China cut benchmark interest rates by 25 basis points to shore up slackening economic growth. The action came after the close of Indian stock markets.
Auto makers, which stand to benefit from lower domestic interest rates, gained on Thursday, getting an additional boost from optimism the government will decide not to raise excise duties on diesel vehicle sales.
Still, India is seen faces steep fiscal and economic challenges, and some analysts doubt how much longer domestic equities can rally after posting their longest winning streak since early February.
The stance from foreign investors could be key. Foreign institutional investors net bought 1.69 billion rupees in equities on Wednesday, turning buyers for the first time in five sessions, but remain net sellers of 18.08 billion rupees so far in June, indicating they have sold into the rally.
"The rally is primarily driven from global market rally and improved sentiment, oil price coming down, and possibility of rate reduction by RBI has helped," said C.J George, managing director at Geojit BNP Paribas.
"But in the given time of global uncertainty, it is too early to say weather the rally can sustain
George added markets had already discounted a reduction in interest rates, and are vulnerable for falls.
The BSE Sensex rose 1.2 percent to end at 16,649.05 points. The Nifty rose 1.05 percent, to close at 5,049.65 points.
The slump in oil prices, the surprisingly weak growth seen in the first three months of the year, and more dovish comments from a RBI deputy governor have sparked hopes of interest rate cuts.
Banking shares, as measured by the NSE banking index, rose 2.1 percent, marking a fourth consecutive winning session for a combined advance of 7.4 percent, compared with a 4.3 percent gain in the broader NSE index.
Shares in auto companies also rose on hopes the government will decide against implementing higher excise duties on diesel vehicle sales after top executives lobbied hard against the proposal.
India had mooted the plans after the government backed off initial plans to raise the price of diesel.
Maruti Suzuki India (MRTI.NS) rose 3.2 percent, while Mahindra and Mahindra (MAHM.NS) ended 2.1 percent higher.
Reliance Industries (RELI.NS) rose 0.75 percent, paring earlier gains of as much as 2.2 percent, as investors had hoped for more fireworks, though Chairman Mukesh Ambani said Reliance aims to double its operating profit in the next 4-5 years.
However, software services exporters fell after UBS predicted global tech spending from banks, financial services and insurance firms will fall 6 percent in 2012, though adding Infosys (INFY.NS) would offer "better downside protection.
Infosys shares rose 1.6 percent, but Tata Consultancy Services (TCS.NS) falls 0.9 percent, while Wipro (WIPR.NS) declines 2.4 percent. (curtsey : reuter)
Rupesh Yatesh Dalal
Head Research Department
Head Research Department
Website : www.marketcalls.net
Facebook : www.facebook.com/marketcalls.net
Twitter : @marketcallsnet
Yahoo Messenger : rupeshydalal@yahoo.com
Email : info@marketcalls.net
