Indian shares rallied on Friday on speculation over race to the Raisina Hill after reports claimed that the Samajwadi Party and Congress have reached an agreement to nominate finance minister Pranab Mukherjee as the UPA's presidential candidate.
Mukherjee may resign from his post on June 24 and could file his nomination papers on June 25, if he is ratified as the presidential candidate at a meeting of UPA leaders this evening, reports said.
The UPA is reaching out to all the parties, including the NDA, to solidly back the candidature of the party veteran, while Anand Sharma, C Rangarajan, Jairam Ramesh, Montek Singh Ahluwalia and Sushil Kumar Shinde take the lead in race to replace current finance minister, it was said.
With a growing number of industry leaders expressing anguish over policy paralysis and ratings agency S&P warning that India may become the first BRIC country to lose its investment grade rating, the new finance minister will have to take tough measures to increase exports and boost the sagging economy to help sustain India's growth story. Fiscal deficit imbalance needs to be addressed quickly to restore investor confidence and attract fresh capital inflows.
Strong global cues on hopes of new stimulus measures from major central banks, the rupee's rebound against the dollar on the back of improved risk appetite, thanks to reports of possible central-bank coordinated action after the Greek election, and continued hopes of a small rate cut from the Reserve Bank of India on Monday also added to the bullish market sentiment.
The benchmark BSE Sensex added 272 points or 1.63 percent to end near the day's high at 16,950, while the broader Nifty index climbed 84 points or 1.67 percent to 5,139. Second-line stocks underperformed, with both BSE mid-cap and small-cap indexes gaining about half a percent each.
Tata Motors jumped 5.8 percent as it reported a 12 percent rise in global sales in May, helped by robust sales of its luxury Jaguar Land Rover brands. Among other auto stocks, Maruti Suzuki advanced 2.7 percent, Mahindra & Mahindra added 2.5 percent and Hero MotoCorp rose 2.4 percent, but Bajaj Auto slid 1.4 percent.
Traders added long positions in banks despite diminished hopes for aggressive monetary easing. SBI gained 1.3 percent, ICICI Bank rallied 3.1 percent and HDFC Bank advanced 2.5 percent. HDFC edged up a modest 0.3 percent after the mortgage lender rejected a recent report by Macquarie Research which said the company had used "aggressive accounting practices" to inflate earnings.
Larsen & Toubro climbed 2.3 percent on securing a new order. Metal stocks like Tata Steel, Hindalco and Coal India rose 2-3 percent, telecoms major Bharti Airtel added 2.2 percent, FMCG player Hindustan Unilever gained 2.1 percent and drugmaker Sun Pharma rose 2 percent.
Jaiprakash Associates rallied 3.4 percent on stake sale buzz. Alembic Pharma jumped 4.6 percent after settling a patent litigation with Novartis. Pantaloon Retail gained 2.2 percent after making a preferential issue of optionally fully convertible debentures to Peter England Fashions and Retail.
Fame India hit the 5 percent upper circuit limit and its parent Inox Leisure rose 2.2 percent ahead of a board meet today to consider their amalgamation. Jyothy Laboratories erased an early gain to end 0.8 percent lower after its board approved the amalgamation of Henkel India with itself.
On the global front, other Asian markets rose broadly, with Hong Kong's Hang Seng index leading the gainers with a more than 2 percent gain, as softer U.S. data boosted hopes of new stimulus measures from major central banks, including the U.S. Federal Reserve. Commodities rose along with equities after Bank of England Governor Mervyn King said that the case for more stimulus is increasing amid signs of a deterioration in the economic outlook.
European stocks followed Asian stocks higher, with cyclical stocks climbing, as the Bank of England's announcement that it would hold its first emergency liquidity-providing operation for banks next week offset the news concerning Moody's downgrade of five Dutch banks. Jitters over Sunday's Greek election eased amid the speculation about possible central bank action in case the election results in turmoil.
Meanwhile, European Central Bank President Mario Draghi said today that the Eurosystem has sufficient tools at its disposal to absorb excess liquidity, should risks to price stability emerge.
Separately, Standard & Poor's Ratings Services said that China's small step to relax its bank deposit rate ceiling lat week was a giant leap for financial sector reforms.
by RTT Staff Writer
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