Sensex edges up on foreign buying; Infosys falls

By Himank Sharma

MUMBAI (Reuters) - The BSE Sensex edged higher on Monday, as blue chips gained on continued foreign inflows despite last week's decision by the U.S. Federal Reserve to start reducing its bond purchases, although a fall in Infosys Ltd capped broader gains.

Foreign institutional investors (FIIs) bought a net of $492.4 million in cash shares in the previous two trading sessions, according to exchange and regulatory data, even after the Fed announced on Wednesday it was trimming monthly bond purchases by $10 billion.

Foreign buying has helped calm nerves in a market that has come to depend on these flows, as overseas funds have net invested $19.9 billion so far this year.

The uncertainty around the QE taper is behind us and the market has digested that news, and compared to other emerging markets, India is definitely well poised to attract incremental FII flows," said S. Krishna Kumar, head equity at Sundaram Mutual Fund.

"We do expect sustained foreign-investor interest, including foreign direct investment, as growth also recovers."

The Sensex closed up 0.1 percent at 21,101.03 points, while the Nifty gained 0.16 percent to close at 6,284.50 for a second consecutive day of gains.

Blue chips gained on FII flows, with ITC Ltd closing 1.3 percent higher. Tata Steel Ltd ended up 1.2 percent, while Oil and Natural Gas Corp closed up 1.4 percent.

Real estate companies, seen as oversold in recent months, rose on value-buying, while public sector banks also made gains after the Reserve Bank of India surprised investors by holding interest rates last week.

Among real estate shares, DLF Ltd closed up 4.3 percent, Housing Development & Infrastructure Ltd ended higher 7.8 percent and Unitech Ltd rose 3.6 percent.

However, software exporter Infosys Ltd fell 2.3 percent after the resignation of V. Balakrishnan, who headed several business units. His exit was the latest departure by a top executive since co-founder Narayana Murthy returned as executive chairman.

Shares in United Spirits Ltd closed down 3.6 percent following an Indian court's order annulling the sale of the Indian spirits maker to British group Diageo PLC , though Diageo said it would appeal the decision.

(Editing by Prateek Chatterjee)