Indian shares soared to their highest level in 14 months on Friday after the government notified all FDI decisions taken last week and signaled it is ready to move forward swiftly with more reforms.
The government today cut withholding tax paid on overseas borrowing by local companies to 5 percent from 20 percent earlier and abolished import and excise duties on non-subsidized LPG cylinders, sparking hopes that more economic reforms are on the anvil to boost investor confidence and revive the sagging economy. The finance ministry also extended the ambit of the Rajiv Gandhi Equity Savings Scheme to encourage small investors to enter the stock market.
The rupee jumped to its highest level in more than four months on hopes that FII inflows will continue after Samajwadi Party supremo Mulayam Singh Yadav pledged his support to the United Progressive Alliance, saying his party doesn't want to let communal forces to come to power.
Global cues also offered some support, with stocks rising across Asia and Europe on hopes that Spain may seek a bailout as early as next week.
Hitting a 14-month high, the benchmark Sensex rose to a high of 18,867 in mid-session trade before paring some gains to end up 404 points or 2.2 percent at 18,753, with 27 of its components advancing. The broader Nifty index climbed 137 points or a whopping 2.46 percent to 5,691, while the BSE mid-cap and small-cap indexes ended up 1.6 percent and 1.5 percent, respectively.
Power, capital goods, metal, banking, public sector and realty stocks paced the gainers, while IT, consumer durable and healthcare stocks ended on a subdued note.
Aviation and retail stocks were in spotlight after the government notified the rules allowing FDI in retail and aviation, giving effect to a cabinet decision taken last week. Debt-laden Kingfisher Airlines jumped over 5 percent, SpiceJet rallied 2.5 percent and Pantaloon Retail climbed 4.7 percent.
NTPC rose 2.7 percent on news that it would raise up to $750 million through bonds and syndicate loan in the current financial year.
Reliance Communication soared nearly 8 percent on reports the telecom major has raised call rates by 25 percent in four service zones. Rival Bharti Airtel rose over 4 percent and Tata Teleservices rallied 3.4 percent.
Infrastructure and capital goods stocks rose sharply after the government gave them access to cheaper funds by slashing a tax on overseas borrowings. Larsen & Toubro jumped 4.2 percent, Jaiprakash Associates soared 6.1 percent and BHEL climbed 7.1 percent.
Reliance Capital jumped over 10 percent on speculation that the government may hike foreign direct investment (FDI) in insurance sector to 49 percent from 26 percent currently at a Cabinet meet next week.
Banks also rallied as falling global crude prices, the rupee's strength and the revival of monsoon in rice, cane and soya bean areas spurred hopes that inflationary tendencies will subside, thus paving way for further monetary policy easing in the October meeting. HDFC Bank, SBI, ICICI Bank and Axis Bank rose 3-8 percent, while mortgage lender gained 2.5 percent.
Metal stocks like Tata Steel and Sterlite rose over 2 percent each, two-wheeler manufacturer Hero MotoCorp rose 1.4 percent, drug maker Dr Reddys Lab gained 1.2 percent and FMCG player Hindustan Unilever added a percent.
Shriram EPC rose 3 percent on reports it plans to raise up to Rs.400 crore by diluting a substantial part of its stake in Shree Jayajothi Cements within the next three months. KEC International soared 13 percent on winning new orders worth Rs. 602 crore.
Suzlon Energy rallied 4.5 percent after its German subsidiary, Systems SE, signed a contract to supply 45 megawatts of turbines to a Polish project developed by WSB Neue Energien GmbH. Mahindra & Mahindra Financial Services fell 1.3 percent after selling a 12.37 percent stake in insurance arm to Leapfrog for Rs 64.33 crore.
by RTT Staff Writer
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