Sensex gains 0.4% to 15,517

Indian shares rose 0.4 per cent in choppy new year trading on Monday as investors cheered a government decision to allow foreigners to directly buy stocks, but the market remained unconvinced about risk appetite, amid worries about the global economy.

Coal India and Tata Motors climbed on positive news flow, but Bajaj Auto tumbled 7.3 per cent on worries over its sales growth outlook, while iron ore exporters slid after a sharp increase in export duty.

“Most issues still relate to the fact that investors are not returning to the market for long-term investment,” said Deven Choksey, chief executive at K R Choksey Shares & Securities.

“I don't see the market heading down much further, but till results season starts, there is likely to be uncertainty.”

The main 30-share BSE index closed up 0.41 per cent at 15,517.92 points. It had fallen as much as 0.6 per cent earlier. Nineteen of its components closed higher.

The Sensex had been among the worst performing markets in the world in 2011, falling 24.6 per cent, as high interest rates and slowing economic growth dented investor confidence.

Foreign funds were net sellers of more than $450 million last year, compared with inflows of over $29 billion in 2010.

With many world markets closed on Monday, activity was relatively light. In the broader market, there were 749 gainers against 666 losers on light volume of 422 million shares.

The 50-share NSE index ended up 0.3 per cent at 4,636.75.

On Monday, the world's largest coal miner Coal India said it expected higher revenue after a change in its pricing method and hoped this would offset the impact of wage increases in the near term. The stock rose 3.8 per cent to Rs 312.15.

Shares in automakers Tata Motors and Maruti Suzuki rose 2.9 per cent and 2.2 per cent, respectively.