Indian shares rallied 2.2 percent on Tuesday to their highest close in a month, on expectations easing inflation pressure will pave the way for the central bank to begin unwinding tight monetary policy this month. Financials such as ICICI Bank and State Bank of India and engineering and construction conglomerate Larsen & Toubro were among the gainers in anticipation of a pick-up in business activity.
Energy major Reliance Industries, whose earnings are driven by refining margins, rose 4.2 percent to its highest close in nearly two weeks. The Reserve Bank of India (RBI), which raised interest rates 13 times between early 2010 and last October, is expected to cut the proportion of deposits that banks keep with the central bank from 6 percent currently, traders said.
"The market was in an oversold zone," said Jagannadham Thunuguntla, head of research, SMC Investments and Advisors Limited. The 30-share BSE index rose 2.22 percent, or 350.37 points, to 16,165.09, its highest close since December 8. All but two of its components rose. The benchmark had slumped almost a quarter in 2011. State Bank of India, the country's largest lender, rose 4 percent, while rival ICICI Bank rose 3.6 percent. Larsen & Toubro climbed 4.2 percent.
Utility vehicle and tractor maker Mahindra and Mahindra rose 5.5 percent and truck and car producer Tata Motors firmed 2.2 percent after the auto industry body forecast commercial vehicle sales to grow 18-20 percent in 2011/12. Software bellwether Infosys, which kicks off the earnings season on Thursday, ended 0.95 percent higher. The 50-share NSE index ended up 2.25 percent at 4,849.55. In the broader market, there were nearly 5 gainers for every loser on volume of 722 million shares.
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