Indian shares rise 2 pct, outsourcers fall

Published: 18 May 2009 23:06:24 PST

* Strong rupee hits export-focused outsourcers

* Trading choppy after 17 pct rally on Monday

* State-run firms gain (Updates to midday)

MUMBAI, May 19 - Indian shares were trading 2 percent higher on Tuesday, but the market was choppy after a 17 percent surge in the previous session following a comfortable victory for the ruling coalition triggered profit taking.

The strong win is expected to enable the government to push economic reforms such as privatisations and freer foreign investment rules to boost slowing growth, but the biggest one-day surge in almost two decades on Monday was seen as overdone.

Export-led IT sector <.BSEIT>, which include outsourcers such as Infosys Technologies <INFY.BO> and Wipro <WIPR.BO>, fell as a jump in the rupee's value against the dollar would affect their profitability.

Government-run State Bank of India <SBI.BO> and explorer ONGC <ONGC.BO> rose.

"This is very healthy for the market. The market should never see one-way traffic," Amitabh Chakraborty, president of equities at Religare Securities, said.

Twenty stocks advanced while in the broader section, gainers led losers 2 to 1 on heavy volume of 351.1 million shares.

On Monday, trading was restricted to just a few seconds after the jump triggered circuit breakers and shut down the market. Volume was paltry at about 13 million shares.

Leading engineering and construction firm Larsen & Toubro <LART.BO> rose 12.5 percent to 1,392.20 rupees, taking gains to 47 percent over three days in anticipation of higher spending on infrastructure.

The benchmark index has gained a quarter of its value this month, while MSCI's measure of Asian market excluding Japan <.MSCIAPJ> has climbed nearly 7.5 percent in the same period through Monday.

Even though this raised concerns the market may have become overbought, analysts predicted a steady rise over the long term.

Foreign funds, which have pumped about $4 billion into the Indian market since mid-March, will be encouraged to invest more with a stable government that is not shackled by former allies such as the communists, analysts said.

"By the second half of the year, GDP figures will be revised upwards. We will see upgrades from rating agencies and company earnings expectations will go up as they are linked to the economy," Chakraborty said.

"So over the longer term, I believe in a blue-skies scenario."

Top outsourcer Tata Consultancy Services <TCS.BO> shed 5 percent to 694.95 rupees, while No. 2 player Infosys eased 9.7 percent to 1,597.80 rupees.

IT-services firms get most of their revenue in U.S. dollars and a 3.2 percent surge in the rupee on Monday can hurt their profit margins.

Energy giant Reliance Industries <RELI.BO>, which has the most weight in the main index, fell 1.8 percent to 2,316.50 rupees after soaring 20 percent on Monday.

Leading lender State Bank of India gained 10 percent to 1,736.30 rupees, while ONGC climbed 5.7 percent to 996.80 rupees.

The 50-share NSE index <.NSEI> was up 1.2 percent at 4,375.50.

MAIN TOP 3 BY VOLUME

* Unitech <UNTE.BO> on 20.9 million shares

* IFCI <IFCI.BO> on 13.8 million shares

* Reliance Natural Resources <RENR.BO> on 12.9 million shares

STOCKS ON THE MOVE

* KS Oils Ltd <KSOI.BO> rose 3.4 percent to 53.50 rupees after the Economic Times cited an unnamed source as saying the edible oil maker is raising 4.5 billion rupees from investors through equity and convertible warrants.

* Essar Shipping <ESRS.BO> fell 5.9 percent to 69.55 rupees after the company posted a 55 percent drop in net profit for the fiscal year 2009.

FACTORS TO WATCH * For technical analysis double click on www.reutersindia.net * Indian rupee trims gains as stocks seesaw [INR/] * Indian bond yields up on auction plan; oil rise [IN/] * Yen dips as stocks climb, risk appetite picks up [FRX/] * U.S. crude futures up more than $1 to above $60/bbl [O/R] * Asian shares hit 7-month highs, oil at $59 [MKTS/GLOB] * Wall St gains as Lowe's lifts mood on economy

[.N] * For closing rates of Indian ADRs

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