The BSE Sensex climbed 0.9 percent on Friday in anticipation of an economic stimulus package and rate cuts to shore up the faltering economy, but a dim outlook for quarterly earnings kept a lid on gains.
Financials such as leading lenders State Bank of India and ICICI Bank rose 2.1 percent each, to 1,343.15 rupees and 473.75 respectively, on hopes for a big
interest rate cut by the Reserve Bank.
The banking sector index was up 1.9 percent. Shares in energy group Reliance Industries advanced 1.6 percent to 1,273.50 rupees, as investors saw value in the
stock that had fallen 57.3 percent in 2008, traders said.
By 11:10 a.m., the 30-share BSE index was up 0.85 percent, or 84.03 points, at 9,987.49, after having opened up 0.9 and then falling as much as 0.4 percent in a seesaw trade. Twenty of its components gained ground.
"The expectations are too much in the market about the fiscal policy and if those expectations are not met then we can see a serious fall in the market," said Neeraj Dewan, director at Quantum Securities.
In the broader market, 1,458 gainers were ahead of 444 losers on average volume of 140 million shares.
"The conviction in the market is still very low and I believe there will be strong resistance at these levels," Dewan said. "One has to be very cautious in the near term because we may see some shocks in the corporate earnings."
Software bellwether Infosys Technologies, which kicks off the earnings parade on Jan. 13, was down 1 percent at 1,136 rupees. Outsourcers get most of their revenue from the United States where a recession has hit demand.
Mumbai brokerage India Infoline said in a report an economic stimulus package and the central bank's "pump-priming efforts" might provide a temporary filip to the markets, but there were doubts about sustainability of any rally.
Expectations for monetary easing to support the slowing economy rose after data on Thursday showed inflation fell to a near 10-month low in the third week of December, while exports dipped again.
"Though the undertone has improved off late, the market lacks strength to rise too far from here," India Infoline said.
The benchmark had plunged 52.4 percent in 2008, its biggest annual drop ever, mainly due to withdrawal of $13.3 billion by foreign investors after a record investment of $17.4 billion in 2007.
"We have seen the worst kind of volatility last year, which we may not see in 2009," said K.K. Mital, head of portfolio management services at Globe Capital, adding the near-term sentiment will be directed by the quarterly corporate earnings.
Shares in Suzlon Energy gained 1.7 percent to 67.40 rupees after the world's fifth-largest wind turbine maker said it had sold a 10 percent holding in Belgium-based wind turbine gearbox maker Hansen to a London investment firm.
The broader 50-share NSE index was up 0.70 percent at 3,054.75.
STOCKS ON THE MOVE
* Hero Honda Motors, 26 percent-owned by Japan's Honda Motor, fell 1.7 percent to 799.40 rupees after the top motorbike maker reported a 10 percent drop in bike sales in December.
* Neyveli Lignite Corp rose 4.2 percent to 72.70 rupees after the company said its board had approved raising up to 18.50 billion rupees through various means.
* Strides Arcolab was up 1.4 percent at 94.25 rupees after the firm said it had got approval from the U.S. Food and Drug Administration for two products.
