Indian shares closed higher for a third straight session on Tuesday as automakers such as Tata Motors Ltd gained on strong monthly sales, while investors shifted their focus to the Reserve Bank of India's policy meeting on Wednesday. The BSE index rose 0.68 percent to 31,497.38, while the broader NSE index ended 0.72 percent higher at 9,859.50. Tata Motors shares closed 3.6 percent higher.
Investors also keenly await the Reserve Bank of India's policy meeting on Wednesday, with the central bank expected to keep rates on hold despite a sharp slowdown in economic growth after inflation surged to a five-month high. In more encouraging news, Indian manufacturing activity expanded for a second straight month in September, with the Nikkei/Markit Manufacturing Purchasing Managers' Index steady at August's 51.2.
But worries about the economy remain with domestic shares falling for a second consecutive month in September, hurt by a slew of negative global and domestic factors, including expectations of further rate hikes by the US Federal Reserve. "The markets are up today on strong auto sales but the caution among investors is still prevalent," said Vinod Nair, head of research at Geojit Financial Services. "I do not expect RBI to cut the rates quickly."
The markets were closed on Monday for a public holiday. The Nifty Auto index rose as much as 2.4 percent on the back of higher vehicle sales in September, with Bajaj Auto Ltd gaining as much as 3.3 percent to a record high. Tata Motors jumped after the carmaker received an order from the Indian government for electric cars. The company also reported a 25 percent rise in September domestic vehicle sales. Dr Reddy's Laboratories jumped as much as 3.7 percent after the drugmaker announced the launch of Sevelamer Carbonate tablets, which are used to treat kidney diseases, in the United States.
Shares of SBI Life Insurance Co Ltd rose as much as 5.7 percent on their trading debut after the company's initial public offering raised $1.3 billion, as investors bet on the sector's growth potential. Meanwhile, Reliance Communications Ltd tumbled as much as 7.8 percent to an all-time low after the company said on Sunday that a merger with Aircel had been called off due to regulatory delays and legal uncertainties.