Indian shares rose over 1 percent on Wednesday, gaining for the second consecutive session, as lenders and infrastructure-related companies such as IDFC Ltd surged after the central bank exempted long-term bonds raised for the sector from reserve requirements. The gains on Wednesday allowed the NSE index to recover all of its falls after the budget was unveiled on July 10 when Finance Minister first announced the country's measures to boost the infrastructure sector.
Some disappointment that the government had not announced any major measures had sparked a bout of profit-taking but analysts say sentiment for shares remain supportive given expectations for reforms in months ahead and improving economic data. Data on Wednesday showed India's exports in June rose 10.22 percent from a year earlier, helped by a pickup in external demand and a weak currency, although the overall trade deficit data came in slightly above market expectations.
"Undercurrent is very strong. We have seen an improvement in the domestic macro situation, which is very positive. Also, there were no funding avenues for capital hungry infrastructure sector and RBI's move is in the right direction," said Daljeet S Kohli, head of research at brokerage, IndiaNivesh. The broader NSE index rose 1.3 percent, or 97.75 points, to end at 7,624.4, to mark its highest close since July 7, when it closed at a record high. The benchmark BSE index rose 1.27 percent, or 321.07 points, to end at 25,549.72, to mark its highest close since July 8.
Both the indexes also decisively closed above their technically important 20-day exponential moving average raising hopes for more gains. Gains in lenders and infrastructure shares were sparked after the Reserve Bank of India issued guidelines exempting bonds for the sector from reserve requirements. IDFC jumped 8.8 percent as the infrastructure lender that obtained a banking license in April, is seen as one of the main beneficiaries of the measures.
Among lenders, ICICI Bank rose 4.8 percent, and Axis Bank added 3.2 percent while State Bank of India gained 2.2 percent. In housing developers, Jaypee Infratech rose 20 percent, hitting its maximum daily limit, DLF Ltd gained 5.8 percent and Unitech Ltd advanced 7 percent after funds for affordable housing were included as part of the bond reserve exemptions.
Pantaloons Fashion & Retail Ltd gained 3.9 percent after the company said late on Tuesday that its board is meeting on Friday to consider the fund-raising proposals, including a rights issue. Hindalco Industries Ltd rose 4.4 percent after Bank of America Merrill Lynch upgraded the stock to "buy" from "underperform," citing better outlook for aluminium prices and lower capital expenditure by the company in the coming years.
However, NIIT Technologies Ltd slumped 7.5 percent, adding to its 11.8 percent fall on Tuesday after the company's April-June profit halved to 448.2 million rupees ($7.5 million) due to spending cuts at two major US-based clients. Housing Development Finance Corp Ltd fell 0.2 percent on worries the lender will be impacted by more aggressive pricing on loans by banks because of the RBI's measures while competition to raise long-term bonds could push up long-term rates.