Indian shares rose about 1 percent on Friday in low volumes, recovering from steep losses in the previous session, as software service exporters such as Infosys gained after global rival Accenture raised its profit outlook for the year.
Still, India's indexes lost about 0.6 to 0.8 percent on the week, marking their fifth consecutive weekly loss, and caution still lingers over how soon the central bank can cut interest rates after the government announced higher borrowing plans in its 2012/13 budget last week.
Government bond yields have surged since then, although senior officials at the Reserve Bank of India told Reuters they were not too worried about these higher borrowing costs. Indian stocks are still sitting on gains of over 10 percent for the year, thanks to about 470 billion rupees ($9.2 billion) in cumulative net purchases by foreign investors, which is helping underpin sentiment.
Despite fears foreign institutional investors (FIIs) would head to the exits, they have still continued to buy, albeit in small amounts, in recent days. "Indian shares are recovering on the back of short-covering as FII flow optimism continued," said R.K. Gupta, managing director at Taurus Mutual Fund.
The main 30-share BSE index gained 0.96 percent to 17,361.74 points, a day after weak manufacturing data from the eurozone and China sent it to its biggest daily drop since late February. Technical analysts see support for the SENSEX at its 200-day moving average, which hit 17,142.76 points on Friday. Meanwhile, the 50-share Nifty index added 1 percent to 5,278.20 points. Some analysts see more gains ahead. Goldman Sachs raised India to "marketweight," saying domestic growth will pick up, while stock valuations remain "relatively attractive".
Among the gainers on Friday, Indian software service exporters rose after Accenture Plc posted better-than-expected earnings and raised its full-year outlook, citing early signs of improvement in the US economy and progress to stabilise the eurozone. The positive view contrasted with more cautious commentary from Indian rivals. Infosys Ltd gained 1.6 percent, while Tata Consultancy Services Ltd added 1.5 percent.
Shares in Reliance Industries, one of the blue chips hit hard on Thursday, rose 1.05 percent, helped as well by an Economic Times report that the government has approved its $1.5 billion plan to produce over 10 million standard cubic meters of gas per day from the KG-D6 block. Banks, which too plunged on Thursday, were among the top gainers on Friday. ICICI Bank rose 1.2 percent.