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Indian Shares End Higher After Positive Inflation Data

Indian shares rose modestly on Friday after data showed inflation unexpectedly eased to its weakest pace in 10 months in November, raising hopes the Reserve Bank of India will cut rates starting January. The wholesale price index eased to 7.24 percent in the month from 7.45 percent in October, offering a pleasant surprise to investors who had expected the headline index to edge up to 7.6 percent. However, inflation is still above the RBI's 5 percent comfort level.

The moderation in inflation is a "very good signal" for the economy, Planning Commission Deputy Chairman Montek Singh Ahluwalia said. C Rangarajan, chairman, PMEAC welcomed the falling inflation trend, but cautioned that the RBI may not cut policy rates at its mid-quarter monetary policy review next week.

Finance Minister P Chidambaram said that retail inflation still remains sticky and there is no room for complacency. Expressing concern over the slow growth, he said the government would make efforts to turn the economy around and create a more investor friendly climate.

The benchmark BSE Sensex ended the session up 88 points or 0.46 percent at 19,317, while the broader Nifty index closed at 5,880, up 28 points or 0.48 percent from its previous close.

Metal stocks led the rebound, with NMDC, Tata Steel, SAIL, Hindalco, Sterlite and Hindustan Zinc gaining 2-4 percent. Rate-sensitive banking and realty stocks followed suit as the moderation in inflation strengthened expectations of a rate cut in January.

ICICI Bank rose 1.3 percent, Axis Bank added 2 percent and SBI rallied 2.6 percent. Punjab National Bank and Bank of Baroda rose 2-4 percent despite credit ratings agency Moody's lowering their credit outlook to 'negative' from 'stable' citing rising bad loans. Realty companies like DLF and Indiabulls Real Estate rose 2-3 percent.

Tata Motors added a percent after its subsidiary Jaguar Land Rover reported a 14 percent jump in global sales in November. Diversified business conglomerate ITC edged up 0.2 percent on bargain hunting following the previous session's steep loss after FTSE lowered its free float weighting for the cigarette maker in its global equity index series.

Wheels India hit the 20 percent circuit limit after Titan Europe Plc and Titan International announced an open offer for acquisition of 14.19 lakh shares of the company.

Shares of Fertilizer manufacturers gained ground after the Cabinet Committee on Economic Affairs cleared a urea investment policy to help set up new plants and expand the existing ones. Coromandel International rose half a percent, Chambal Fertilizers & Chemicals gained 0.9 percent and GNFC rallied 2.5 percent.

Among those that fell, Siemens, BHEL, JP Associates, Power Grid Corporation of India and Bharti Airtel fell 1-2 percent. Dr Reddy's Laboratories slid 0.9 percent after the pharma major launched a public offer to acquire all outstanding shares of the Netherlands-based OctoPlus NV, a specialty pharmaceutical company, at 0.52 euro a share.

Elsewhere, other Asian markets ended on a mixed note despite further signs of improvement in China's manufacturing sector. The nation's HSBC flash purchasing managers' index improved to 50.9 in December, a 14-month high and the fifth straight monthly gain, helped by improvement in areas such as new orders and employment. China's Shanghai Composite index soared 4.3 percent on hopes new policies will emerge from the upcoming central economic work conference on Saturday and Sunday.

European stocks fluctuated as data showed euro-zone business activity hit a nine-month high in December, but remained in negative territory.

by RTTNews Staff Writer

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