The Indian government's success at selling stakes in a clutch of state-run companies lifted both shares and the rupee higher for a second day on Monday.
The 30-share Mumbai Stock Exchange index ended 0.93 percent higher at 5,935.19 points, with gaining issues outnumbering losers 920 to 812.
"Confidence is back, there is more retail participation and the rally has extended to even the mid-caps," said Vipul Sanghvi, senior manager of institutional sales at Fortis Securities, citing two major government share sales as a key factor.
India has launched a flurry of share sell-offs in as many as seven companies as part of its efforts to bridge a fiscal gap that has kept its international debt ratings near junk status.
It hopes to raise nearly $3 billion from the divestment, with more than $2 billion of that set to come from its sale of a 10 percent stake in the country's most valuable firm, exploration giant Oil and Natural Gas Corp (ONGC).
Shares of ONGC rose six percent to 850.90 rupees as India's biggest ever issue, which closes on Saturday, received bids for nearly three times the number of shares on offer.
Gas firm GAIL added seven percent to 230.15 rupees after India priced a 10 percent stake at 195 rupees per share.
Traders now expect the benchmark marker to add 150-200 points this week, with some profit-taking likely around the 6,000 level.
Commodity stocks posted gains in the face of broad demand increases in the rapidly expanding economy.
Oil issues rose on the back of strong January sales reported by auto companies, with state-run Hindustan Petroleum Corp climbing more than six percent to 530.30 rupees.
Cement stocks were close behind, buoyed by a rise in February shipments to a fiscal year high of 10.3 million tonnes.
Asia's third-largest economy is set to grow at a cracking 8.1 percent in the current fiscal year ending on March 31, powered by a rise in farm output that is in turn churning up a higher demand for manufactured goods in the vast and populous rural hinterland.
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