Bargain hunting lifted Indian shares for a second day on Thursday after the market had skidded more than 12 percent since the start of January, but traders said the bounce may be short-lived on risk averse global sentiment. Realty and infrastructure firms led the rise as investors saw value in the beaten down sector, which has been roiled by rising borrowing costs and commodity prices.
The main 30-share BSE index rose 1.98 percent, or 358.69 points, to 18,449.31, with all but one of its components gaining ground. The 50-share NSE index gained 1.7 percent to 5,526.75. Engineering and construction conglomerate Larsen & Toubro climbed 3.7 percent, while top-listed property developer DLF added 7.4 percent.
"You still cannot say the markets are out of the woods yet. We expect a downward to sideways movement due to more selling by foreign funds," said Ambareesh Baliga, vice president at Karvy Stock Broking. The escalation of violence in Egypt could dampen risk appetite among global investors, and rising oil prices should put upward pressure on inflation in India which imports about 80 percent of its oil requirement.
The benchmark index is down 10 percent in 2011, hit by foreign fund outflows of $1.5 billion, after rising 17 percent last year on record inflows of $29.3 billion. Data on Thursday showed food inflation had accelerated to its highest level since December 25 on rising prices of onions and petrol, straining headline inflation and strengthening a case for more monetary tightening.
India has been battling soaring prices and the central bank has raised key rates seven times since last March. Top telecoms firm Bharti Airtel climbed 5.1 percent, to 339.80 rupees, extending the previous day's gains as some analysts were optimistic about its future earnings growth after it posted a bigger-than-expected 41 percent drop in quarterly profit.
Rival Reliance Communications closed 0.85 percent higher at 118.05 rupees. Software stocks rose on optimism about growth outlook. Infosys Technologies rose almost 1 percent while larger rival Tata Consultancy added 0.5 percent. India's software and services exports are seen rising 16-18 percent in the year to March 2012, an industry body said on Wednesday, as demand from Western clients is expected to remain strong. Export revenue for the year to March is also seen higher than the body's earlier forecast. Business activity in India's services sector grew at a faster clip in January than in the previous month, boosted by new orders and expectations of solid growth, but costs also soared, a survey showed on Thursday.