Indian shares rose on Friday, rebounding from three-month lows as bluechips such as HDFC seen as oversold rose, and after the finance ministry clarified it would not question the validity of tax residency certificates held by foreign investors. India's indexes, however, ended lower for a fifth consecutive week after the budget on Thursday disappointed investors by financing increased revenues in part by raising taxes on some companies and high-earners.
That is raising concerns about whether the Reserve Bank of India will have scope to cut interest rates, given signs of fiscal consolidation had been seen as a key criteria for the central bank. "There are worries around the current account and fiscal deficit, but in my opinion rate cut would mostly come in March" said G. Chokkalingam, Executive Director & Chief Investment Officer, Centrum Wealth Management.
The benchmark BSE index rose 0.3 percent, or 56.98 points, to end at 18,918.52, recovering after hitting its lowest close since November 27, 2012 on Thursday. The BSE fell 2.1 percent for the week, falling for a fifth week in a row. The broader NSE index rose 0.47 percent, or 26.55 points, to end at 5,719.70, ending down 2.2 percent for the week.
Despite the prevailing uncertainty in market sentiment, investors at least welcomed a clarification from India's finance ministry that it would not question the validity of tax residency certificates held by foreign investors. The clarification from the ministry comes after the government created confusion with a proposal on Thursday stating a tax residency certificate "shall be necessary but not a sufficient condition" to take advantage of double taxation avoidance agreements.
Bluechips such as Housing Development Finance Corp Ltd rose 2.6 percent while Larsen & Toubro Ltd gained 2.4 percent, as their budget day losses were seen as overdone. Indian banks also recovered from steep falls in the previous session as analysts said the 2013/14 budget was unlikely to have as big a negative impact as investors had first anticipated.
ICICI Bank Ltd rose 1.5 percent, while State bank of India ended 0.3 percent higher. Shares in Maruti Suzuki India rose 5.2 percent, recovering from a 11.6 percent fall since index provider MSCI said on February 14 it would delete the automaker from its India index after the close of trade on February 28. Technology shares gained as a weakening rupee was seen benefiting returns from overseas profits. Infosys Ltd rose 0.2 percent, while Wipro Ltd ended 1.3 percent higher.
However, among decliners, ITC fell 1.2 percent after the federal budget proposed to raise the excise duty by about 18 percent on cigarettes. Shares in real estate developer DLF Ltd declined 6.5 percent amid weak sentiment and on fears that demand for premium housing may be hit after the 2013/14 budget introduced a 10 percent surcharge on taxpayers with annual income of more than 10 million rupees. Other premium housing developers also fell, with Oberoi Realty ending 3.1 percent lower, Sobha Developers declined 2.9 percent.