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Indian Shares Rebound On Fed Comments, P-note Clarification

Indian shares gained ground in volatile trading on Tuesday, as firm global cues amid signs that easy monetary policy would remain in place in the U.S. for some time underpinned sentiment.

The upward move gained momentum in the afternoon session after media reports said the government is not keen on chasing Participatory Notes, or derivative products that allow foreign investors to invest into Indian equities via tax havens like Mauritius under the new General Anti-Avoidance Rules ( GAAR) targeting tax avoidance.

There will be no blanket application of GAAR on the so-called participatory notes and rules will be applicable only if P-notes fail to meet 1 in 4 tests, including abnormality, misuse & abuse, lack of commercial purpose and bonafide purpose test, a TV news channel reported, citing unnamed finance ministry officials.

The benchmark 30-share Sensex jumped over 300 points from the day's low before paring gains and ending up 205 points or 1.2 percent at 17,257, with 24 of its components advancing. Maruti Suzuki, India's largest carmaker, fell 1.8 percent after the Maharashtra state government proposed to hike taxes on petrol and diesel cars in the state budget for 2012-13 tabled in the state assembly on Monday.

State-run power producer NTPC lost half a percent following an announcement that it has signed a EUR72.5 million term-loan facility with KFW, Germany. Coal India declined 0.7 percent on reports that its independent directors have blocked a proposal to sign 20-year fuel supply agreements with power producers with a guarantee to meet at least 80 percent of the commitment under government orders.

Power equipment maker BHEL lost a percent, drug maker Sun Pharma eased 0.2 percent and two-wheeler manufacturer Bajaj Auto ended little changed with a negative bias.

The broader Nifty index climbed 59 points or 1.14 percent to 5,243, while the BSE mid-cap and small-cap indexes ended in negative territory. The Indian rupee led gains in emerging Asian currencies and bond yields spiked, pushing the 10-year yield to its highest level of 2012, as investors awaited the announcement of government's borrowing program for April-September.

Among the prominent gainers in the Sensex pack, property developer DLF rallied 4.3 percent, metal stocks such as Jindal Steel, Tata Steel and Sterlite rose 1-4 percent, telecom major Bharti Airtel jumped 3 percent, mortgage lender HDFC added 2.5 percent and Tata Motors, India's largest automaker, gained 1.7 percent.

Nalco closed up almost 4 percent on divestment reports. Suzlon Energy advanced 0.7 percent after its arm REpower Systems SE signed a contract with PNE Wind AG to deliver 54 turbines for an offshore wind energy project.

Tata Metaliks rose 2.1 percent after its board gave approval to allot preference shares to its promoter Tata Steel. Sadbhav Engineering gained 3.2 percent on winning a Rs.1,220-crore NHAI contract.

Mahindra Satyam tumbled 2.5 percent on reports its Australia unit is eying acquisitions worth $50-100 to become a $750-million company by 2015.

Manappuram Finance plunged 7.4 percent and Muthoot Finance slumped 8 percent after the Reserve Bank of India released the fair practices code for non-banking finance companies doing lending business.

Jaiprakash Associates slipped 0.4 percent, snapping a two-day winning streak. Kingfisher Airlines fell 1.5 percent on reports that it may lay off close to 50 percent of its current employees as it suspends operations to several destinations.

On the global front, other Asian markets rallied on Tuesday, with key benchmark indexes in South Korea, Singapore, Hong Kong and Japan rising 1-2 percent, as investors cheered dovish commentary from Federal Reserve Chairman Ben Bernanke.

Bernanke did not hint at a third round of bond purchases, but signaled that U.S. monetary policy will remain accommodative to produce faster job growth. Bernanke's comments spurred hopes of more policy easing ahead, weakening the dollar and boosting appetite for riskier assets.

Better-than-expected German business confidence data and reports that Germany may be softening its stance on beefing up the euro zone's bailout funds also helped offset fears concerning Spain and data showing an unexpected drop in U.S. pending home sales in February.

China's Shanghai Composite index bucked the upward trend to end 0.2 percent lower after data from the National Bureau of Statistics showed profits for Chinese chemical producers, auto makers and other major industrial companies fell by 5.2 percent in the first two months of 2012.

Major European averages were up between 0.5 percent and 1 percent in early trading and the U.S. index futures signal a positive start, as investors welcomed Bernanke's latest comments on interest rates.

by RTT Staff Writer

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