Sensex rises 117 pts, Coal India up 6%

Indian shares rose to their highest weekly close in five weeks on Friday, on hopes that renewed policy reforms by the government and easing inflation would give a much needed boost to the country’s slowing economy.

The main 30-share Bombay Stock Exchange benchmark the Sensex ended up 0.7 per cent, or 117.11 points, at 16,154.62, with 20 of its components in the green. The benchmark was one of the world’s worst performers in 2011, falling almost a quarter. The 50-share National Stock Exchange index was up 0.7 per cent, at 4,866 points.

In the broader market, gainers overwhelmed losers 1,034 to 440 on total volume of 833.7 million shares.

Analysts said a decline in inflation could give the central bank much-needed headroom to unwind its tight monetary policy and boost corporate investment crimped by high interest rates.

Banks were among the gainers, with top lender State Bank of India and rival ICICI Bank rising 0.66 per cent and 1.03 per cent respectively, on expectations of an easing interest rate cycle. The banking index rose 0.5 per cent.

Coal India, the world’s largest coal miner, rose 5.6 per cent after it said it would sign a five-year agreement with its worker unions to increase wages by 25 per cent as against 30-40 per cent demanded. This was the stock’s highest single-day percentage gain since July 27 last year. Clarity on the wage negotiations and cash usage would remove two key overhangs on the stock, JP Morgan said in a note.

“There is a growing consensus that we are going to see a good investment on the policy front by the government. Second, one is getting more comfortable with the way macroeconomic indicators have behaved in the last few days,” said Gajendra Nagpal, Chief Executive at Unicon Financial Intermediaries.

Earlier this week, India formally eliminated restrictions on foreign investment in single-brand retail, opening the door to the likes of Swedish furniture giant IKEA.