mumbai June 19, 2012, 17:45 IST
mumbai 06 19, 2012, 17:50 IST
The BSE Sensex rose 1 percent on Tuesday, recovering from steep losses in the previous session, as hopes the government would raise diesel prices as an initial step to improve its finances lifted oil stocks such as ONGC.
The hopes come a day after Fitch Ratings became the second credit agency after Standard & Poor's to threaten India's investment-grade status by cutting the sovereign outlook to "negative," and after the Reserve Bank of India dashed hopes for monetary stimulus by keeping interest rates on hold.
Slowing policy reforms and perceptions of a government hampered by an unruly coalition have been key reasons behind the steep falls in the markets that sent the rupee to a record low in May.
Still, investors are feeling plenty of caution, given the continued euro zone debt concerns and ahead of a Federal Reserve policy meeting, sending defensive and domestic-oriented stocks such as cigarette maker ITC higher as well.
"Traders are looking at any ray of hope as far as stalled policy decisions, like hike in diesel prices or FDI in retail, which can boost domestic sentiment," said Rikesh Parikh, vice-president of equities, Motilal Oswal Securities Ltd.
The 30-share BSE index rose 0.9 percent to 16,859.80 points, recovering a bulk of its 1.4 percent loss on Monday after the RBI disappointed markets by keeping interest rates unchanged.
The broader 50-share NSE index rose 0.8 percent to 5,103.85 points.
Hopes for a diesel price hike had dwindled after the government came under intense pressure last month after allowing a rise in petrol prices, but the optimists has been given a new push after Fitch Ratings on Monday become the second credit agency to cut the country's outlook.
Oil producers such as ONGC share with the government the cost of subsidising refineries by selling crude to them at a discount. Refiners then sell fuels, except for petrol, at government-mandated prices.
ONGC rose 1.7 percent, while Oil India rose 1.15 percent.
Refiners Bharat Petroleum Corporation rose 1.72 percent, Hindustan Petroleum Corporation gained 5.96 percent, while Indian Oil Corporation added 3.65 percent.
Still, traders described plenty of caution as well. Defensive stocks were in favour on Tuesday, with ITC up 2.6 percent, while Sun Pharma rose 1 percent.
Among other gainers, Reliance Industries added 2.5 percent on continued support from its ongoing buy back programme.
Shares in GVK power & Infrastructure rose 4.8 percent on reported plans to raise $500 million to $600 million by selling a stake in its Singapore arm.
Mindtree rose 1.6 percent after the founder of Cafe Coffee Day chain V G Siddhartha disclosed on Monday raising his stake in the software services provider.
Among decliners, shares in India's no.2 software exporter Infosys fell 1.4 percent on worries the company would lower its guidance given volatility in currency markets.