Sensex, Nifty hit new peak; SBI leads state-run lenders' rally

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex and Nifty rose to record highs on Monday as state-run lenders rallied after State Bank of India reported better-than-expected asset quality in July-September, raising hopes for a revival in a sector laden by bad loans.

Sentiment also got a boost after trade deficit in Asia's third largest economy narrowed to $13.35 billion in October from $14.25 billion in September, according to government data.

Continued foreign buying also helped sentiment. Overseas investors bought shares worth 6.96 billion rupees ($112.8 million) on Friday, bringing their total purchase in stocks to $15.24 billion so far in 2014.

 

"Reducing non-performing loans, along with falling inflation, is leading to a belief of higher profits at state-run lenders which will continue for sometime," said G. Chokkalingam, founder of Equinomics, a research and fund advisory firm.

The BSE Sensex rose as much as 0.57 percent to an all-time high of 28,205.71. The index ended up 0.47 percent.

The Nifty closed 0.49 percent up after earlier hitting a record high of 8,438.1.

State Bank of India led the rally in state-run lenders, ending 5.5 percent higher after earlier hitting its highest intraday level since April 2011.

India's biggest lender reported late on Friday better-than-expected asset quality despite posting a 52 percent increase in provisions for bad loans in its second quarter.

SBI's results attracted investors to state-run lenders, which have lower ownership and valuations relative to private sector rivals, traders added. Bank of Baroda rose 4.2 percent, while Punjab National Bank ended up 2.7 percent.

In government-run power sector lenders, Rural Electrification Corp jumped 10.2 percent, while Power Finance Corp soared 7.6 percent.

Among mid-cap banks, Central Bank of India rose 4.3 percent, while Federal Bank advanced 3.2 percent.

Rally in state-run lenders pushed the NSE bank index <.NSEBANK> to an all-time high of 17,676.60 before closing 0.36 percent higher.

Tata Motors shares also gained 4.1 percent after earlier rising to its record high of 547.55 rupees on its unit Jaguar Land Rover's earnings, though the Indian auto maker reported a 7 percent fall in net profit in the July-September quarter.

Balkrishna Industries slumped 7.1 percent, adding to Friday's 16.6 percent decline after price cuts weighed on July-September earnings, analysts said.

(Editing by Anand Basu)