BSE Sensex up more than 1 pct before RBI move

Posted 01 29 2008 6:47PM

MUMBAI (Reuters) - Indian shares rose more than 1percent in morning trade on Tuesday on expectations the Reserve Bank of India (RBI) will cut interest rates at a policy review, with sentiment also boosted by gains in most Asian markets.

Top private sector firm Reliance Industries and No. 2 software exporter Infosys Technologies lead gains.

India's central bank reviews monetary policy on Tuesday, with analysts slightly favouring a cut in the key lending rate following a hefty U.S. rate cut last week.

Seven of 13 analysts polled by Reuters expect a 25 basis point cut in the repo rate to 7.50 percent. The announcement is due at noon.

At 10:33 a.m., the 30-share BSE index was up 1.13 percent, or 205.9 points, at 18,358.64, with all but four of the components rising.

It rose as much as 1.86 percent earlier in the session.

The index had recovered from an intra-day fall of 5 percent to end 1.1 percent down on Monday as banks and auto shares were boosted by rate cut expectations.

If the central bank decides to cut the repo, its lending rate to banks, it would be the first such move in nearly four years.

The central bank said on Monday that inflation risks from high international oil and food prices continued, which some analysts interpreted as a sign rates would be held steady.

"Status quo can be maintained since there is no urgent need to cut rates," brokerage India Infoline said in a note.

"Corporate earnings are strong, credit growth is still above 20 percent, asset prices have not corrected that much and inflation remains a threat due to incomplete pass-through of high crude oil prices," it said.

HDFC Securities analysts said in a research note some selling could be expected at higher levels due to nervous unloading of positions ahead of the futures and options expiry on Thursday.

Shares in Reliance Industries were up 1.4 percent at 2,601 rupees, while Infosys Technologies gained 3.5 percent to 1,497.05 rupees.

Shares in export-driven software firms, which were beaten down badly on fears of a recession in their largest market, the United States, found buyers at lower levels.

Sector leader Tata Consultancy was up 2.7 percent at 876.90 rupees, while No. 3 Wipro gained 3.4 percent.

Top car maker Maruti Suzuki pared early gains and slipped 0.5 percent to 858.75 rupees, ahead of its quarterly results later in the day. The company is forecast to post a 19 percent rise in net profit from a year ago to 4.47 billion rupees.

Largest-listed property firm DLF Ltd gained 2.6 percent, while mortgage lender Housing Development Finance Corp was up 3.2 percent. Both the stocks would benefit if there is a rate cut, traders said.

Data showed foreign funds bought $166 million worth shares on Friday, their first net purchase since Jan. 14. The funds had unloaded $3.6 billion of stocks in the seven sessions to Thursday.

In the broader market, 1,511 of the gainers were ahead of 663 losers on volume of 82 million shares.

The 50-share NSE index was up 1.47 percent at 5,351.85.

Elsewhere in the region, Karachi's 100-share index gained 0.48 percent to 13,948.06, while Colombo's All-share index was up 0.31 percent at 2,452.00.

STOCKS ON THE MOVE

* Jet Airways Ltd was down 2.7 percent at 732 rupees after it reported a net loss for December quarter.

* Suzlon Energy Ltd was up 6.1 percent at 334.20 rupees after the world's No. 4 wind turbine maker said net profit for the December quarter nearly doubled and that it had orders worth 171.07 billion rupees ($4.3 billion) as of Jan. 25.

* Chemicals maker India Glycols Ltd rose 7 percent to 398.25 rupees after its net profit soared for December quarter.

MAIN TOP THREE BY VOLUME

* Himachal Futuristic Communications on 11.4 million shares.

* Reliance Natural Resources on 3.7 million shares.

* Ispat Industries on 2.8 million shares.