A spurt in buying in the latter half of trading buoyed the markets, and helped the Sensex post its biggest daily percentage gain in almost three weeks on Wednesday, ahead of the crucial Winter Session of Parliament.
The Sensex closed at 18,460.38, up 131.06 points, or 0.72 per cent – its biggest gain since November 2 -- while the Nifty ended the day above 5,600 at 5,614.80, up 0.78 per cent.
The markets picked up pace after a choppy beginning followed by a flat run in afternoon trade.
According to Lancelot D’Cunha, chief executive officer of ITI Wealth Management, the markets are trading in a band. “(The) markets will be looking for cues from Parliament and (the) ‘fiscal cliff’ situation in (the) US,” he said.
Private sector banks rose on value-buying with ICICI Bank gaining 1,92 per cent. HDFC Bank, which hit a 52-week high of Rs. 657.40, closed 1.54 per cent higher. However, State Bank of India, the country’s largest commercial lender, ended the day 0.25 per cent lower.
A weaker rupee bolstered software services exporters such as Infosys, which rose 0.99 per cent. Tata Consultancy Services rose 0.61 per cent, while Wipro ended 1.35 per cent higher.
Consumer durables and FMCG too held their ground through the session, with ITC and Hindustan Unilever ending the day at 1.96 per cent and 0.78 per cent, respectively.
Pharma stocks Cipla and Sun Pharma were among the big Sensex gainers, each rising around 2.5 per cent, despite concerns over the pharma pricing policy. However, Wockhardt fell 3.05 per cent while Dr Reddy’s shed 0.15 per cent. Power companies Jindal Steel and Power (1.97 per cent) and Tata Power (1.98 per cent) were the other big gainers.
Bharti Airtel , which has had a good run on the stock market gaining 15.2 per cent so far in November as of Tuesday's close, succumbed to profit booking and fell 0.63 per cent.
Auto stocks Maruti Suzuki, which hit a 52-week high yesterday, Tata Motors, Hero Motocorp and Bajaj Auto were part of 11 stocks that traded lower on the Sensex. State-owned power stocks NTPC (3.46 per cent) and BHEL (2.7 per cent), housing finance company HDFC (0.42 per cent), and Coal India (0.07 per cent) also end in the red.
Shares of Spicejet rose to a day’s high of Rs 37.90, before closing at Rs. 37.40 (up 7 per cent) after a report that Kalanithi Maran and his wife, Kavery Kalanithi, had resigned from the board of directors of Kal Airways, the holding company of SpiceJet, sparked talk of a potential sale of the airline.
Software and back office provider MphasiS, meanwhile, fell 1 per cent after majority owner Hewlett-Packard took a $8.8 billion write-down after alleging a massive accounting scandal at its British software unit Autonomy. The news sent HP's shares, which owns a 60.5 per cent stake in MphasiS, plunging 12 per cent to a 10-year low.
Hewlett-Packard said on Tuesday it took the charge related to its acquisition of software firm Autonomy, citing "serious accounting improprieties," as it swung to a fourth-quarter loss.
Shares in Kingfisher Airlines rose 1.96 per cent after a newspaper reported that private equity firm Blackstone has made an offer to buy prime office and retail real estate property from investment holding company UB Holdings, citing two people familiar with the developments.
A spokeswoman for Blackstone declined to comment on the report calling it "a pure speculation story". An UB Group spokesman also declined comment.
Nonetheless, dealers say the media report about a potential deal is raising hopes that Vijay Mallya, who controls Kingfisher and UB Holdings, could use any money raised to inject into the debt-laden carrier.
Manishi Raychaudhuri, head of equity research at BNP Paribas, told NDTV that investors should stick to quality defensive stocks with some bottom-up high beta stocks. FMCG, pharmaceuticals, IT, auto and consumer proxy banks are likely to have stable revenue and earnings growth trajectories, he added.
All eyes now are set on Parliament where the Winter Session will begin tomorrow. The government, reduced to a minority for the first time since coming to power in 2004, is scrambling for support ahead of a Parliament session that will severely test its economic reform agenda, and its chances of success look bleak.
For the moment, there is no threat of the government falling. But an obstructive opposition and unreliable allies could mean there is little progress on reforms like opening up insurance and pension businesses when Parliament's month-long winter session gets under way on Thursday.
"If things go awry, and legislation gets deadlocked it would be negative for markets and will mean those that were pessimistic on Indian reforms taking shape will be vindicated," said Suresh Kumar Ramanathan, head of regional rates and forex strategy at CIMB in Kuala Lumpur.
Analysts warn of a "nightmare scenario" in which the government loses a test vote in Parliament on its flagship reform—opening up the retail sector to foreign supermarkets, a decision that has drawn fire from both opponents and allies who say it will destroy the livelihoods of mom and pop store owners.
Among the reform bills due to be introduced are measures to allow up to 49 per cent foreign investment in local insurance companies and domestic pension funds. Currently, the cap for insurers is at 26 per cent and foreign investors are barred from buying into pensions.
Uncertainty surrounding the passage of these bills has contributed to a 3.8 per cent fall in the Sensex since the start of October.
The rupee, meanwhile, has shed all of its gains since the government launched its new economic reform drive in September. Analysts attribute the fall to a host of factors, including the global downturn, a ballooning deficit and fears that the promised reforms may not be fully implemented.
In the rest of the world, Japan’s Nikkei average climbed to a two-month high on Wednesday, with exporters gaining after the yen hit a seven-month low against the dollar on expectations that a new government will aggressively push the Bank of Japan to expand monetary stimulus.
European shares and the euro fell on Wednesday after Greece's international lenders failed to reach an agreement needed to provide it with emergency aid, though some of the losses were recouped on talk that a deal was close.
Overnight, US stocks halted a two-day rally on Tuesday, while European shares edged higher on expectations euro zone finance ministers will approve the next tranche of bailout cash for Greece.
MSCI's broadest index of Asia-Pacific shares outside Japan was little changed, with Australian shares easing 0.1 per cent and South Korean shares opening up 0.3 per cent.
With inputs from Thomson Reuters