Indian shares rose notably on Monday, extending Friday's rally, even as the Reserve Bank of India (RBI) maintained a status quo at its policy meeting leaving key policy rates unchanged.
The RBI kept its key policy rates and the cash reserve ratio (CRR) unchanged, citing the rupee's weakness, high current account deficit and uncertainty over capital inflows. In its guidance, the central bank said it is only a durable receding of inflation that will open up the space for monetary policy to continue to address risks to growth.
India's trade deficit widened to a seven-month high of $20.1 billion in May from $17.8 billion a month ago, provisional data released today showed, stoking fresh concerns about the country's deteriorating economy. Gold and silver imports jumped nearly 90 percent year-on-year to $8.4 billion, slower than an annual 138 percent surge in the previous month.
The local markets received support from global peers as investors speculated that the U.S. Federal Reserve will signal it is in no hurry to tighten policy.
At the conclusion of the Fed's two-day policy meeting on Wednesday, Chairman Ben Bernanke is expected to clarify that his plans to scale back the central bank's massive bond-buying program later this year would not mean a tightening of monetary policy and that he is committed to keep Fed Funds rate lower for longer.
Other Asian markets ended mostly higher, with Japan's Nikkei index rallying 2.7 percent, while the markets elsewhere posted modest gains. European stocks also tracked Asian markets higher on optimism over the course of future Fed policy.
Extending Friday's rally, the benchmark 30-share Sensex ended the session up 148 points or 0.77 percent at 19,326, with 23 of its components advancing.
Auto, capital goods, consumer durable and IT stocks gained ground, while metal and realty stocks ended little changed. The broader Nifty index rose by 42 points or 0.72 percent to 5,850.
BHEL led the gainers in the Nifty pack with a 4 percent rally. Mahindra & Mahindra also jumped 4 percent after it signed a global alliance agreement with Spanish auto components maker CIE Automotive.
SBI, Sun Pharma, HCL Technologies, Maruti Suzuki, Axis Bank, Reliance Infrastructure, Bajaj Auto and Bharti Airtel rose 1-2 percent.
Jet Airways slumped over 12 percent in early trading before reversing direction to end 0.3 percent higher after the FIPB deferred the proposal of the Abu Dhabi-based Etihad Airways to acquire a 24 percent stake in the company. Towards the fag-end of trading session, the airline announced that it entered into codeshare agreements with European carriers Air France and Royal Dutch Airlines.
Tata Motors closed 0.7 percent higher despite posting a 17 percent fall in group global wholesales for May. Larsen & Toubro gained 1.2 percent on reports it will bid for four Indian coast guard contracts worth Rs 4,000 crore.
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