Indian shares rallied on Tuesday, as weak industrial production data spurred hopes that the RBI will cut interest rates aggressively at its upcoming policy meeting next Monday. The IIP figures are disappointing and the government would take steps to give positive signals to the industry and kick-start the economy, finance minister Pranab Mukherjee said at a conference of public sector banks in New Delhi.
Government data showed that industrial production rose 0.1 percent from a year earlier in April, reflecting contraction in capital goods and a dip in manufacturing output. Output fell 3.5 percent in March from a year earlier, according to revised figures.
Meanwhile, Prime Minister's Economic Advisory Council Chairman C Rangarajan rejected the Standard & Poor's report on the likely downgrade of India to 'junk' status' saying the agency was misinformed. Their fears are misplaced and the Indian economy is likely to grow at a better rate in the current fiscal compared to the last, he added.
Paring early morning losses of over 100 points, the benchmark BSE Sensex ended the day up 195 points or 1.17 percent at 16,863, with 25 of its components advancing. Dr Reddy's Laboratories and Wipro led the decliners, falling about 2 percent each, while Hindustan Unilever shed 0.6 percent, Sun Pharma eased 0.2 percent and Tata Power slipped 0.1 percent.
The broader Nifty index rose by 62 points or 1.22 percent to 5,116, while the BSE mid-cap index and small-cap index underperformed, rising 0.6 percent and 0.3 percent, respectively.
Rate-sensitive stocks led the rally on hopes of a rate cut from RBI in the forthcoming meeting. DLF rose 2.2 percent after its arm, DLF Hotel Holdings, divested its entire shareholding in Adone Hotels and Hospitality for Rs.567 crore.
Maruti Suzuki, India's largest passenger car maker, jumped 3.5 percent after its board approved a proposal to merge Suzuki Powertrain India with the company. Tata Motors rallied 3.1 percent, Mahindra & Mahindra gained 1.9 percent and Hero MotoCorp added 0.7 percent.
SBI led the gains in the financial sector, climbing 2 percent, while private sector lender ICICI Bank rose 1.6 percent, HDFC Bank gained 1.9 percent and mortgage lender HDFC edged up 0.4 percent.
Among other prominent gainers, engineering & construction giant Larsen & Toubro rose 2.5 percent, metal stocks Hindalco and Sterlite ended up over 2 percent each, state-run oil firm ONGC added 2 percent and diversified business conglomerate ITC advanced 1.5 percent.
Venus Remedies climbed 4.7 percent on saying that it has received patent from the U.S. Patent Office for a breakthrough antibiotic product. JSW Steel added 0.8 percent after reporting a 25 percent rise in steel production for May.
Tech Mahindra rose 1.6 percent and Mahindra Satyam added 2.5 percent despite news that IL&FS Financial Services has raised objections to Satyam accounts. Pipavav Defence and Offshore Engineering Company gained 1.3 percent after it entered into a strategist tie-up with European defence firm DCNS.
Elsewhere across Asia, stocks ended mostly lower, with Japan's Nikkei pacing the declines with a 1 percent loss, as an initial euphoria over a weekend deal to bail out Spain's banks turned to skepticism. With Spanish bond yields rising sharply yesterday, investors feared that the $125 billion Spanish aid deal could further aggravate Spain's public debt burden and hamper the nation's ability to refinance itself in the capital market.
Investors also turned their focus to debt auctions in Italy taking place on Wednesday and Thursday and the Greek elections slated for 17th that will decide whether the beleaguered nation continues with austerity measures and remains in the euro.
European stocks were moderately higher and the U.S. stock futures pointed to a higher start despite doubts lingering on the effectiveness of the 100 billion euro bailout for Spanish banks.
by RTT Staff Writer
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