Indian shares edge higher; oil firms extend rally

(Reuters) – India’s benchmark index edged higher on Tuesday as state-run oil companies such as ONGC extended a recent rally, although broader sentiment was still marked by lingering disappointment the prior day’s rupee measures were not bold enough.

Reliance Industries gained 1 percent, also helping indexes recover from two previous days of falls, as traders cited signs the energy conglomerate had stepped in to purchase shares as part of its ongoing buyback.

Traders say stock markets may remain volatile ahead of the expiry of derivatives on Thursday, and given the rupee currency is hovering near record lows in a reflection of the global unease ahead of a key European Union summit.

“One has to keep eye on rollover and rupee for further cues of the market” said Prakash Diwan, Head of Institutional Clients Group at Asit C.Mehta Investment.

“We expect rupee to test 60 level and then maybe some action and flows would happen” he said

India’s main 30-share BSE index gained 0.14 percent to 16,906.58 points, after falling 0.9 percent over the previous two sessions.

The broader 50-share NSE index added 0.12 percent to 5,120.80 points.

The Reserve Bank of India announced measures intended to prop up the rupee, which on Friday hit a record low of 57.32 to the dollar.

Those measures included raising the limit of foreign investment in government bonds by $5 billion to $20 billion.

However, the announcement was greeted with disappointment, given market hopes for measures to bring in long-term investments that could help narrow the country’s large fiscal and current account deficits as well as boost faltering growth.

Some encouraging developments have helped ease some of the worries. Coca-Cola said on Tuesday it plans to invest $5 billion from 2012 to 2020, which comes after IKEA said on Friday it would invest 1.5 billion euros to enter India.

“There are possibilities of some encouraging talk as well on FDI and Diesel price hike” Diwan said

Gains on Tuesday were led by state-run oil companies, which have rallied this month as slumping crude prices are expected to ease the burden of selling fuels at subsidised prices.

ICICI Securities said this so-called “under-recovery” cost for oil companies has declined to 15.2 billion rupees, below the 20 billion expected at the start of the fiscal year started in April, and could decline to 13.24 billion rupees if prices for fuels such as diesel are raised.

Oil & Natural Gas Corporation gained 1.72 percent, bringing its gains for the month to 9.5 percent, while Gas Authority of India added 2.4 percent.

Among other gainers, India’s biggest power equipment maker Bharat Heavy Electricals Ltd rose 0.8 percent after saying it got a 9.5 billion rupee contract for a hydro-electric project in Bhutan.

Manappuram Finance gained 11.21 percent after the gold loan company said late on Monday private equity firm Baring India raised its stake by 0.95 percent to 5.94 percent.

Midcap construction company NCC gained 0.6 percent after Citigroup upgraded the stock to “buy” from “sell”, saying the recent share price correction reflected “most” of the risks facing the company.

However, IVRCL fell 1.44 percent after Citigroup downgraded the stock to “sell” from “buy”, citing lower margins, increased interest costs and funding requirements.

FACTORS TO WATCH * Euro drops to two-week low vs yen * Oil rises towards $92 ahead of EU meeting * EU summit worries keep euro near 2-week low * Foreign institutional investor flows * For closing rates of Indian ADRs

ASIA-PACIFIC STOCK MARKETS: Pan-Asia…….. Japan……. S.Korea… S.E. Asia……. Hong Kong… Taiwan…. Australia/NZ…. India……. China…..

OTHER MARKETS: Wall Street …. Gold ……. Currency.. Eurostocks….. Oil …….. JP bonds… ADR Report ….. LME metals. US bonds.. Stocks News US.. Stocks News Europe

DIARIES & DATA: Indian Data Watch Asia earnings diary U.S. earnings diary European diary Indian diary Wall Street Week Ahead Eurostocks Week Ahead

TOP NEWS: For top Asian company news, double click on: U.S. company news European company news Forex news Global Economy news Technology news Telecoms news Media news Banking news

(curtsey : reuter)

Rupesh Yatesh Dalal
Head Research Department

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