Sensex heads for best quarterly gain in 2 years; Brexit fears ease

REUTERS - Indian shares rose more than 1 percent on Thursday, erasing their 2.2 percent losses suffered on Friday after Britons unexpectedly voted to exit the European Union, as investors focused on improving prospects of the domestic economy.

Hopes of a good monsoon and a recovery in earnings have boosted the market, with the broader NSE Nifty surging more than 7 percent in the April-June quarter, its strongest since April-June 2014 and its first quarterly gain in five.

Shares have recovered some 2.5 percent since they fell sharply on Friday following the Brexit vote.

"All the bad news like Brexit and Rexit (RBI Governor Raghuram Rajan's exit) is getting priced in and we are definitely heading on the upside," said B. V. Rudramurthy, managing director at Vachana Investments Pvt. Ltd.

"Any market will always move up only with good earnings, and this along with a better-than-expected monsoon are fundamental factors which should help markets move higher."

The positive trend in earnings growth is expected to roll over into the next quarter, with companies poised to report their June-quarter results starting mid-July.

The broader NSE index <.NSEI> was up 1.12 percent at 8,296.20 by 0833 GMT, while the benchmark BSE index <.BSESN> was 1.04 percent higher at 27,017.87.

For the month, the NSE was up 1.65 percent, while the BSE was 1.28 percent higher.

Markets are, however, expected to remain volatile ahead of the expiry of derivatives contracts on Thursday.

Auto stocks extended gains after the government on Wednesday approved a hike in salaries and pensions for its employees, a move that is expected to boost consumer demand and underpin economic growth.

Hero MotoCorp Ltd rose 2.20 percent, while Bajaj Auto Ltd and TVS Motor Co Ltd were up 1.74 percent and 3.05 percent, respectively.

Idea Cellular Ltd rallied for a fourth straight session, advancing as much as 2.29 percent to its highest since June 3 after the company said on Tuesday it was confident of regaining market share.

Industrial conglomerate Nava Bharat Ventures rose as much as 13 pct to its highest in almost two years after a loan given to its Zambian unit was repaid.

(Reporting by Darshana Sankararaman in Bengaluru; Editing by Biju Dwarakanath)