Rate cut hopes boost BSE Sensex to three-month high

By Archana Narayanan

MUMBAI (Reuters) - The BSE Sensex rose on Thursday to mark its highest close since early February, as interest rate-sensitive stocks such as HDFC gained on hopes that the RBI will cut interest rates on Friday while TCS rose on value buying.

The main index continues to build on gains of 3.6 percent in April, buoyed by strong foreign investor inflows, as the recent slump in commodity prices is seen helping bridge India's current account deficit.

India's factories lost momentum in April as output grew at its weakest pace in over four years, but a jump in export orders augured well for the coming months, a survey showed on Thursday.

The Reserve Bank of India may sweeten its expected 25 basis point interest rate cut with a similar reduction in the cash reserve ratio to ease tight market liquidity conditions as increasingly benign inflation gives it room to manoeuvre.

"I understand that some fresh FIIs have registered with SEBI in 2013, who are very bullish on the Indian market. I see heavy FII inflows in equities in the near term," said R.K. Gupta, managing director at Taurus Mutual Fund, who expects a 50 bps rate cut by RBI on Friday. If CRR is also cut that will be a bonus, he added.

Foreign investors bought stocks to the tune of $1 billion in April, SEBI data showed.

The BSE Sensex rose 1.19 percent, or 231.59 points, to end at 19,735.77, marking its highest close since February 4.

The Nifty rose 1.17 percent, or 69.15 points, to end at 5,999.35, marking its third session of gains, after touching the psychologically important 6,000 level earlier in the day.

However, NSE's volatility index, or India VIX, is rising, keeping many wary of profit-taking on the policy day, dealers said.

The market participants are also cautiously awaiting a European Central Bank meeting later in the day that could see an interest rate cut to support growth.

Mortgage lender Housing Development Finance Corp Ltd gained 1.9 percent, while State Bank of India was up 1.6 percent on expectations of monetary easing.

Shares in Tata Consultancy Services Ltd gained 4 percent on short covering in May futures, triggered by value buying in the cash market after April's underperformance, dealers said.

Among other IT stocks, Infosys Ltd rose 2.3 percent and HCL Technologies gained 2 percent.

Shares in IDFC Ltd gained 2.5 percent after its January-March profit rose 57 percent to 5.26 billion rupees, beating analyst estimates.

Kotak Mahindra Bank shares rose 1.5 percent, helped by the January-March results of the lender.

Cement stocks such as ACC Ltd and Ambuja Cements Ltd gained 1.4 percent and 1.9 percent respectively, ahead of results on Friday.

Ambuja Cements could miss January-March operational earnings consensus forecast, according to Thomson Reuters StarMine data.

StarMine's SmartEstimates, which places greater emphasis on forecasts by top-rated analysts, shows Ambuja could report an operating profit of 6.09 billion rupees for the quarter, compared with mean consensus estimate of 6.31 billion rupees.

However, Bharti Airtel Ltd shares fell 0.6 percent after it reported a 50 percent fall in quarterly profit that capped the third straight year of declining earnings at India's top telecommunications carrier.

(Additional reporting by Abhishek Vishnoi; Editing by Jijo Jacob)