India's main indexes rallied in the last day of the quarter to post their first weekly rise in six, as lenders gained after the central bank's surprise bond purchases were seen helping inject liquidity into the sector. Banks also benefited from portfolio management as Friday also marked the end of the fiscal year.
Including Friday's gains, the banking sector surged 28 percent for the quarter, making it one of the top performing sectors from January to March. Reserve Bank of India stepped in on Friday to buy up to 100 billion rupees ($1.95 billion) of bonds through open market operations on Friday, in what was a surprise move.
"Bond yields are down on OMOs, which of course is helping the banking stocks," said Sandeep J. Shah, CEO of Sampriti Capital. "RBI will continue to help in (the) future if liquidity is tight or bond yields run away" The main 30-share BSE index surged 2 percent to 17,404.20 points, its biggest daily gain since March 9. The 50-share NSE index rose 2.3 percent.
For the quarter, the SENSEX index rose 12.6 percent, slightly outperforming the MSCI Asia-Pacific index excluding Japan. Still, despite the strong gains in the last day of the quarter, they reflect what has been a volatile March. The federal budget for fiscal 2012/13 disappointed investors, with higher-than-borrowing plans raising fears that the central bank would have to delay interest rate cuts.
This week, markets were hit by fears the government would impose taxes on foreign investors, who have bought a net of 460 billion rupees so far in 2012, with unclear comments from Finance Minister Pranab Mukherjee on Friday further muddling the picture.
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