The Sensex rebounded in late trade on Wednesday to post its highest close in 12 weeks, as metal producers and auto makers jumped, although investors were doubtful the rally could be sustained after a rise of nearly 12 per cent so far this year.
Auto makers rose on better-than-expected January sales. Top carmaker Maruti Suzuki gained 2.4 per cent to its highest close in five and a half months after it reported its first monthly sales rise since May last year.
No 2 lender ICICI Bank fell 1.4 per cent after surging nearly six per cent in the previous session. Top mortgage lender Housing Development Finance Corp fell 1.3 per cent after private-equity firm Carlyle Group was said to have sold a quarter of its stake in the company.
The main 30-share BSE index rose for a second straight day to close 0.62 per cent, or 107.03 points higher at 17,300.58, with 19 of its components rising. It was the index’s highest close since November 9.
“I think February is going to be difficult,” said Gajendra Nagpal, chief executive of Unicon Financial Intermedi-aries in New Delhi.
“One must also take into account that stock valuations are becoming reasonably expensive. Also, there are things like the elections and the budget,” he said.
The benchmark posted its best January rise in 18 years, rallying 11.3 per cent on a surge in foreign fund investments, after losing nearly a quarter of its value last year.
Foreign funds have been net buyers of about $2 billion of shares in January, compared with net outflows of about $500 million last year.
Elections in five states, including in key states Uttar Pradesh and Punjab, end in early March. A good showing in the state elections would be a boost for the Congress party that runs the federal government and would help revive stalled policy reforms.