MUMBAI: Indian shares rebounded to close 1 percent higher on Tuesday, tracking firm global markets, with investor short covering as well as beaten-down stock buying aiding the rise.
World stocks, the euro and commodity prices advanced on Tuesday after gauges of Chinese and German manufacturing activity were not as weak as some had feared, encouraging investors to dip back into equities after a recent sharp sell-off on global growth concerns.
Software services firms bounced back, with India's top software exporter Tata Consultancy Services leading the gains. TCS jumped nearly 7 percent to close at 981.6 rupees, while smaller rival Infosys rose 3.75 percent to 2,276.95 rupees.
The benchmark 30-share main BSE index ended 0.96 percent higher at 16,498.47 points, its second straight day of gains, with 19 of its components closing in the green.
"Yesterday, we saw some amount of short covering which made the market bounce back. Today, the short covering has continued and along with that we are seeing some amount of value buying as well," said Ambareesh Baliga, chief operating officer at investment consultants Way2Wealth.
On Monday, Indian shares had gained 1.2 percent as investors grabbed shares offering value following last week's plunge.
The 50-share NSE index closed 1.02 percent higher at 4,948.90 points.
"We probably may go 5,150 to 5,200 (points) on the Nifty, having seen a larger part of the pressure in the last week," said Deven Choksey, managing director at brokerage K.R. Choksey.
"The market is still in a range. Within that range any fall will be an opportunity to buy," Choksey said.
In the broader market, 1,009 advancers outnumbered 406 decliners on a volume of 547.8 million shares.
Bajaj Auto, India's second largest two-wheeler maker, rose more than 5 percent on value buying. The stock had fallen 2 percent over four sessions last week.
Energy major Reliance Industries , which last week ceded its status as India's most valuable company to state-run miner Coal India, extended gains to end 1.09 percent higher at 765.25 rupees.
But foreign institutional investors kept off Indian stocks, selling shares worth about $1.7 billion so far in August, after having purchased a similar amount in July.
Analysts expect volatile trading until Thursday, which is typical ahead of the expiry of the August derivative contracts on the National Stock Exchange on Thursday.
Index heavyweight Coal India closed down 0.5 percent, after having gained more than 2 percent in the previous two sessions. The stock had fallen nearly 3 percent earlier in the day.
Tata Motors shed 1.3 percent after Wall Street bank Morgan Stanley cut its price target to 974 rupees from 1,324 rupees, as it sees its unit Jaguar Land Rover (JLR) underperforming in 2011/12 because of deteriorating global macro environment.
At 1104 GMT, Japan's Nikkei share average rose 1.22 percent on Tuesday, while MSCI's broadest index of Asia-Pacific shares outside Japan gained 2.6 percent.
STOCKS THAT MOVED
Shares of GVK Power and Industries rose 2.3 percent to 17.8 rupees after it said late Monday that it had acquired 14 percent additional stake in Bangalore International Airport from Siemens Project Ventures.
Shares of Mahindra Satyam fell 2.8 percent to 66 rupees after the company said late Monday that it had received an income tax notice worth a total of 21.14 billion rupees for assessment years 2002-03 and 2007-08.
Copyright Reuters, 2011
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