Indian stocks start quarter with gains; banks rally

Mon Apr 2, 2012 7:50am EDT

* Govt spending seen easing banks' liquidity crunch
    * Tata Motors rise after March sales

    By Manoj Dharra	
    MUMBAI, April 2 (Reuters) - Indian shares rose for a second
session in a row on Monday, as banking stocks rallied on
expectations the cash crunch that had constrained the sector
would ease in the new fiscal year thanks to government spending
and a more vigilant central bank.	
    Sentiment was supported by limited foreign selling of Indian
stocks, despite fears last week about taxation for overseas
investors, while global risk sentiment improved after China's
manufacturing index rose to an 11-month high. 	
    The gains in the first day of the quarter come after a tough
March, marked by disappointment over the central bank's decision
not to cut interest rates and by higher-than-expected borrowing
plans for fiscal 2012/13 announced by the government.	
    Investors are more optimistic in April, however, on hopes
the Reserve Bank of India will deliver a rate cut at its April
17 meeting, while government spending, starting this week, could
help ease a credit crunch in the banking sector.	
    "With government spending kicking in, I think liquidity
scenario should ease off in the second half," said Sandip
Sabharwal, CEO of portfolio management at Prabhudas Lilladher.  
 	
    "Rate cut is a distinct possibility on April 17," he added.	
    The main 30-share BSE index rose 0.42 percent to
17,478.15 points, while the 50-share NSE index also
added 0.42 percent, ending at 5,317.90 points    	
    Banking shares had suffered in March from pronounced
liquidity shortages, tied in part to end-of-year tax outflows
and delayed government spending, prompting the RBI to step in
with surprise bond purchase on Friday.	
    However, the start of a new year usually marks renewed
spending by the government, helping inject money into India's
financial systems.	
    State-run banks were additionally boosted after they sold
shares to the government at above-market prices, as part of
previously announced capital injection plans.	
    State Bank of India rose 1.6 percent after saying
on Friday it had approved the issuance and allotment to the
government of 36 million shares at a premium. 	
    Among private lenders, HDFC bank rose 1.64
percent.	
    Broader sentiment also improved after overseas investors
sold only a net 1 billion rupees ($19.7 million) last week,
according to provisional exchange data, despite fears the
government was considering targeting the tax liability of
foreign institutional investors. 	
    Foreign investors have bought a net of about $9 billion in
stocks so far in 2012, despite growing economic worries that
have most recently included a balance of payments that turned
negative in the three months through December. 	
    Also on Monday, Tata Motors rose 0.56 percent
after reporting sales in March rose 20 percent from a year ago,
as consumers pushed forward their purchases ahead of the 2012/13
federal budget, which, as expected, raised duties on cars.
 	
    Titan Industries surged 6.2 percent, after earlier
hitting a record of 265 rupees, on a Press Trust of India report
that the a unit of the Commerce Ministry will allow the company
to import gold directly from overseas market. 	
    However, among decliners, Reliance Industries fell
1.34 percent due to fears falling refining margins and reduced
output from its KG-D6 gas blocks would hit fiscal Q4 earnings.	
    Bank of America-Merrill Lynch warned Jan-March net profit
for Reliance could drop 20 percent year-on-year to 42.9 billion
rupees, in a report dated on Monday, maintaining its "neutral"
rating on the stock. 	
    	
  FACTORS TO WATCH	
  * Yen pares losses, Aussie off as caution returns      	
  * Oil eases below $123 after first-quarter rally        	
  * World stocks propped by China data; Europe      	
  * Foreign institutional investor flows       	
  * For closing rates of Indian ADRs                    	
  	
         	
   ASIA-PACIFIC STOCK MARKETS:      	
Pan-Asia........ Japan.......   S.Korea... 
S.E. Asia.......        Hong Kong...  Taiwan.... 
Australia/NZ....        India.......  China..... 	
         	
   OTHER MARKETS:	
Wall Street ....        Gold ....... Currency.. 
Eurostocks.....         Oil ........ JP bonds... 
ADR Report .....      LME metals. US bonds.. 
Stocks News US.. Stocks News Europe    	
     	
   DIARIES & DATA:	
Indian Data Watch   Asia earnings diary 
U.S. earnings diary    European diary       	
Indian diary          Wall Street Week Ahead  
Eurostocks Week Ahead          	
     	
   TOP NEWS:	
For top Asian company news, double click on:          
U.S. company news     European company news 
Forex news            Global Economy news 
Technology news      Telecoms news       
Media news          Banking news          
Politics/General news   Asia Macro data      	
    A multimedia version of Reuters Top News is available at:   
  	
 topnews.session.rservices.com      	
     	
   LIVE PRICES & DATA:	
World Stocks           Currency rates   
Dow Jones/NASDAQ    Nikkei                
FTSE 100                  Debt      
Indian rupee             LME price overview    	
	
 (Additional reporting by Abhishek Vishnoi; Editing by Rafael
Nam and Rajesh Pandathil)
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