MUMBAI - Indian shares rose 2.25 percent on Wednesday to its best close in 10 months, as markets across Asia and Europe were boosted by cash-flush investors buoyed by signs of revival in global economic growth.
Energy giant Reliance Industries and state-run
explorer Oil and Natural Gas Corp were among the leading gainers as oil topped $71 a barrel, a day after settling above $70 for the first time in seven months.
Engineering conglomerate Larsen & Toubro continued to ride a bull wave on hopes India's re-elected ruling coalition would increase spending to improve the
country's ramshackle infrastructure, potentially boosting the company's order book.
The 30-share BSE index .BSESN ended up 339.81 points at 15,466.81, its best close since Aug. 11 last year, after climbing as much as 3 percent at one stage.
Twenty-two of its components rose while in the broader section, losers led gainers 1,553 to 1,227 on relatively heavy volume of 575.1 million shares.
I am not comfortable with this rally. The index is being led up by big stocks like Reliance and L&T, but even they can experience profit-booking. We will see a big correction soon, D.D. Sharma, vice president at Anand Rathi Securities, said.
The benchmark has rocketed up 92 percent from 2009 lows in early March, mainly driven by foreign fund inflows of almost $7 billion.
Starved off gains last year, investors were buying whatever came their way after a stable government came to power last month in India, Bank of America Merrill Lynch equity strategist Vijay Gaba said.
In the melee, valuation is probably the last thing in the minds of the insatiate investors at this point in time, Gaba wrote in a note titled Hunger Knows No Taste.
Still, there are concerns pricey shares and a raft of potential equity offering could threaten the stock surge.
The BSE index has surged more than 60 percent this year, after slumping by 52 percent in 2008 when foreign funds pulled out about $13 billion.
Central banks around the world have created an enormous amount of liquidity in the system, and this liquidity has to find room somewhere, Subhajit Gupta, head of research at Reliance Equities, said.
Money is finding its way into other assets classes such as commodities and also into emerging markets.
Satyam Computer jumped 10 percent, its daily limit, for a second day after the fraud-tainted outsourcer released figures showing it stayed profitable.
The stock rose 6.65 rupees to 73.50 rupees, while Tech
Mahindra, which acquired Satyam in April, ended up
5.5 percent at 784.85 rupees after soaring more than a quarter on Tuesday.
Reliance Industries, which has the most weight in the main index, advanced 2.1 percent to 2,320.25 rupees and ONGC rose 2.9 percent to 1,164.60 rupees.
Larsen climbed 3.8 percent to 1,633.65 rupees, almost
tripling in value since early March.
Investors confidence has been lifted as sagging economic growth is expected to pick up speed in the latter half of the year. Traders are also betting on investor-friendly reforms such divestments and relaxation of foreign investment rules in the insurance and pension sectors.
Finance Minister Pranab Mukherjee, who is set to present the 2009/10 budget on July 3, urged banks on Wednesday to help lower borrowing costs for consumers to spur growth.
State Bank of India, the country's largest lender, will decide on lowering interest rates by the end of this month, its chairman said.
The government is committed to reforms in fuel pricing but it wants to ensure affordable fuel supply, Petroleum Secretary R.S. Pandey said.
The 50-share NSE index rose 2.3 percent to
Asian shares were higher on Wednesday, with Japan's Nikkei .N225 rising 2.1 percent, while MSCI's measure of other Asian markets .MSCIAPJ gained 3.4 percent.
At 1028 GMT, the FTSEurofirst 300 .FTEU3 index of top
European shares was up 2.1 percent.
MAIN TOP 3 BY VOLUME
* Unitech on 26.1 million shares
* Reliance Natural Resources on 16.9 million
* Suzlon Energy on 16.9 million shares
STOCKS THAT MOVED
* Non-ferrous metals producer Sterlite Industries gained 1.5 percent to 663.65 rupees after copper prices climbed 2 percent.
* Drugmaker Dr Reddy's Laboratories rose 4.9 percent to 746.15 rupees after the company said late on Tuesday it received approval from the U.S. Food and Drug Administration to sell its omeprazole mg drug used for the treatment of heartburn.
FACTORS TO WATCH
* For technical analysis double click on www.reutersindia.net
* Indian rupee steady tracking firm stocks; weak dlr
* India 10-yr bond yield near 2-mo high on supply woes
* Dollar falls as economy hopes cool risk aversion
* Oil tops $71 after large drop in U.S. crude stocks [O/R]
* Shares, oil surge on recovery hopes; dollar slips
* US stock index futures point to gains; oil above $71 [.N]
* For closing rates of Indian ADRs INADR
(Editing by Ranjit Gangadharan)