Indian shares started August on a positive note and snapped a four-session decline, rallying 0.6 percent on Monday, after a deal by top US lawmakers to avoid a debt default provided some respite to investors and propelled them towards riskier assets.
The main stock index, however, closed off early highs, as Asia's third-largest economy saw further signs of a slowdown, and big gains were not likely for the market in the near term. India's July factory expansion was the weakest in 20 months, and a government panel cut its growth forecasts, while leading auto makers reported a fall in July sales. The 30-share BSE index closed 0.64 percent, or 117.13 points, higher at 18,314.33 points, with 23 components advancing. It had risen as much as 1.3 percent earlier.
The benchmark had slid 3.4 percent in July, its biggest monthly decline since January. "Today's rally is driven by some relief on US' debt worries," said Deven Choksey, managing director and CEO of KR Choksey Shares. The HSBC Markit Business Activity Index, based on a survey of around 500 companies, fell to 53.6 in July from 55.3 in June, its third straight decline, although it remained above the 50 mark that separates growth from contraction for the 28th consecutive month.
"The growth engine cannot apply brakes every now and then. Something needs to be done on that front," Choksey said. "In an attempt to control inflation, if you halt the growth engine of the economy, in the process you would create a bumpy business environment." Export-oriented software firms led the gains on hopes the last minute deal in Washington meant the United States - their biggest market - would avoid default.
Infosys and Wipro gained 1.4 percent and 0.7 percent respectively, while sector leader Tata Consultancy Services edged 0.2 percent lower. Maruti Suzuki posted a record 25 percent slump in July sales as production of one of the top carmaker's popular sedans was crippled due to a shift in its manufacturing facility.
Maruti's shares fell as much as 1.3 percent earlier, and later recovered to close 0.2 percent higher. Lenders mostly advanced with the sector index climbing 0.4 percent after sliding 3.5 percent last week. Leading private sector lenders ICICI Bank and HDFC Bank rose 0.3 percent and 0.8 percent respectively, while top lender State Bank of India closed barely changed.
Steel Authority of India Ltd tumbled nearly 6 percent to 118.80 rupees, its lowest since May 2009, after the largest domestic steel producer posted a 29 percent slump in quarterly net profit as sharply higher raw material costs hurt margins. It closed 5.1 percent lower. JSW Steel plunged as much as 13.1 percent to 671.40 rupees, its lowest since June 2009, after Citigroup downgraded it to "sell" and cut its price target by more than half.
The stock closed 10.1 percent lower. Foreign funds have invested a net of $2.9 billion over the past five weeks, but the flows have been volatile in recent weeks. The 50-share NSE index gained 0.6 percent to 5,516.80 points. Market breadth was negative at close with losers beating gainers in the ratio of 1.6 to 1 on NSE, while 531 million shares were dealt, lower than the 90-day daily average volume of 587 million shares.