Sensex rises 4th day; longest winning run in 3 months

Wednesday, 29 June 2011 00:00 -     - {{hitsCtrl.values.hits}}

(Reuters): The BSE Sensex climbed for a fourth consecutive session on Tuesday, its longest winning streak in three months, as global appetite for risk perked up on hopes for containing Greece’s debt problems.

Trading, however, was choppy, indicating resistance after a more than 5 percent rally over four days, with domestic headwinds such as high inflation and rising interest rates causing unease.

The 30-share BSE index closed up 0.43 percent or 80.04 points at 18,492.45, with 21 components advancing. It had fallen 0.5 percent at one stage.

Financials led the rise after a disappointing performance so far in the year. The sector index firmed 0.2 percent, but is down 6.3 percent in 2011.

“No way,” said Sunder Subramaniam, senior manager of sales at brokerage Sharekhan, when asked if the Sensex could see more gains.

“Inflation and growth issues are deterring investments. After seeing phenomenal gains for the last two years, 2011 could end in the red.”

The BSE index has bounced over the past few days thanks to short-covering and moves by fund managers to boost their portfolio before the quarter ends.

But the benchmark is down early 10 percent in the year to date on worries of slowing earnings growth as higher borrowing costs douse demand. The central bank has raised key rates by 275 basis points in 10 moves over 15 months.

Foreign funds were net buyers of $335 million over two days to Friday, after pulling out $688 million over nine sessions.

Cairn India ended down 0.7 percent as investors worried about loss of revenue due to royalty payments, after Vedanta Resources Plc completes a takeover.

Cairn Energy agreed last August to sell a majority stake in Cairn India to Vedanta in a deal that was valued at up to $9.6 billion, but the deal, which would be one of the largest in India’s energy sector, has been delayed due to a disagreement over royalty payments.

On Monday, Vedanta and Cairn Energy agreed to cut the price of the long-pending deal in a move that could signal the end-game, analysts said.

“In our view, removal of the non-compete provision stems from a lack of clarity over the issue of royalties payments for Rajasthan block, which we believe could remain an overhang,” Goldman Sachs analysts said in a note.

Top lender State Bank of India gained 0.7 percent, while rivals ICICI Bank and HDFC Bank rose 0.4 percent and 0.3 percent respectively.

Mortgage lender Housing Development Finance Corp climbed 2.3 percent.

Metal producers Sterlite Industries and Hindalco Industries rose nearly 1 percent and 3.9 percent respectively on firm international base metal prices.

Copper traded firm in Shanghai on increasing confidence that the Greek parliament will pass an unpopular austerity plan.

Still, the outlook for Indian shares remain clouded by uncertainties.

The Sensex is headed for its second annual decline in a decade as persistently high inflation, rising interest rates and slowing growth keep investors at bay, a Reuters poll showed last week.

The median forecast of 18 investment houses, brokerages and research firms taken over the past week, sees the benchmark at 19,750 at end-2011 and at 21,500 by next June.

The Nifty gained 0.3 percent to 5,545.30.

Around 594 million shares were dealt on the NSE, slightly higher than the 90-day daily average volume of 592 million shares, while gainers beat losers in the ratio of 1.2 to 1.

World shares as measured by MSCI were up 0.2 percent at 1024 GMT, while the emerging markets equities edged 0.1 percent higher.