The Sensex rallied 1.7% on Tuesday to its highest close in almost six weeks, as banks and automakers led a wave of positive sentiment caused by easing domestic inflation and above-forecast GDP growth in China.
Investors piled into top carmaker Maruti Suzuki and reversed recent falls in index heavyweight Reliance Industries, powering a rally that began the day before after data showed inflation at a two-year low in December.
?The expectations are there for good news from the central bank, and there?s good news from overseas on the wider front,? said Ketan Dedhia, managing director, Mumbai-based Nalanda Securities.
?There has been a good deal of foreign institutional investor buying today.? Ketan added.
Maruti shares closed up 10% at R1,108.35, after rising as much as 11%, after the company said it would raise prices across its model range to offset a rise in commodity costs.
Reliance, which had fallen 4.7% in the previous four sessions, closed up 4.1% at R742.05.
Construction and real estate companies DLF and Jaiprakash Associates gained strongly after investors sensed that retreating inflation could prompt a cut in interest rates, which would ease pressure on credit-heavy industries.
Debt-laden DLF, India?s biggest developer, ended up 2.5% at R198.15, while infrastructure and cement company Jaiprakash closed at R63.55, a rise of 5.7%.
India?s headline inflation slowed in December to 7.47% as food price pressure eased dramatically, but the central bank is expected to leave interest rates on hold next week.
The Sensex climbed 1.71%, or 276.69 points, to 16,466.05, with all but six of its components advancing. It was the highest close since December 8.
The 50-share NSE index closed up 1.92% at 4,967.30 points. In the broader market, gainers outpaced losers by a ratio of more than 2 to 1 on total volume of about 752 million shares. Carmakers, which have seen sales hit particularly hard by a series of interest-rate increases by the Reserve Bank of India to fight inflation, led gains all day, with the sector index ending up 2.6%. Tata Motors closed up 1.7% after rising as much as 3.6% on news that global sales rose 27% in December, while shares in domestic rival Mahindra & Mahindra closed up 2.6% at R705.60. Tata Consultancy Services closed down 0.5% after moving in a tight range ahead of the company?s December quarter results. Smaller rival HCL Technologies ended the day up 4.8% at R425.4 after the company said its net profit for the quarter to end-December rose 43%.
Shares in India mirrored gains across Asia, as bourses advanced on slightly better-than-expected Chinese economic growth data that soothed investor worries the euro zone debt crisis was slowing global activity. The MSCI Asia Pacific Index gained 2% to 117.92 as of 7:54 pm in Tokyo, adding more than $160 billion in market value. Emerging-market stocks rose, driving the benchmark index to a two-month high, after China?s gross domestic product expanded more than economists estimated.
The MSCI Emerging Markets Index gained 2.1% to 972.10 as of 1:07 pm in London, set for the highest close since November. 14. The Shanghai Composite Index advanced 4.2%, the most since October 2009.
The pan-European FTSEurofirst 300 index of top shares was up 0.8% at 1,033.97 points, its highest level since August 2011. Gains were led by car makers and mining companies.
The MSCI world equity index gained by around 0.9% after rising in Asian trade on the Chinese data.
