Indian shares logged their biggest weekly gain in nearly two months on Friday, bolstered by gains in financials as hopes of an end to the monetary policy tightening cycle in Asia's third-largest economy drew investors back into beaten down stocks. The gains in the domestic market were also underpinned by a rally in global stocks, which headed for their best week in over two years following EU leaders' efforts to contain the eurozone debt crisis.
Shares in ICICI Bank, the country's No 2 lender, led the gains, rising 7.1 percent to 933.35 rupees ($18.85), as hopes of a pause in interest rate hikes boosted credit growth outlook. Still, the stock is down 18.5 percent so far this year. The bank is also expected to report nearly 16 percent rise in its fiscal second-quarter profit on Monday.
The main 30-share BSE index ended up 2.98 percent at 17,804.80 points, after having risen as much as 3.6 percent in early deals to its highest level since August 4, with all but three of the index components closing in the positive territory. The benchmark, which is down 13.2 percent in 2011, surged 6.1 percent in this holiday truncated week - its best weekly percentage gain since the week ended September 2. The market was closed on Thursday after a brief special session on Wednesday.
"Interest rate hikes were a big overhang on the market and the investors were concerned about its impact on the corporate profitability," said Dipen Shah, head of research for private client group at Kotak Securities. Indian shares have been battered this year as surging inflation and interest rates dimmed the growth outlook for the economy and corporate earnings. The global economic uncertainty has also pushed investors away from risky assets.
Shares in other financials such as top lender State Bank of India rose 2.3 percent to 1,909.80 rupees, No 3 lender HDFC Bank gained 2.3 percent and top mortgage lender Housing Development Finance Corp surged 3.2 percent. Infosys ended up 1 percent at 2,858.65 rupees, after rising 4.7 percent during trade to its highest level in more than three months, after the plan to resolve the European debt crisis boosted the business outlook in its No 2 market.
Also, Infosys co-chairman said in Shanghai the country's No 2 software services exporter was looking for acquisitions worth up to $700 million. Infosys' bigger rival Tata Consultancy Services gained 2.3 percent to 1,121.50 rupees and No 3 Wipro closed 5.4 percent higher at 374.05 rupees. Both the firms also count Europe as their second biggest export market.
Energy major Reliance Industries, which has the heaviest weightage in the BSE index, rose 3.0 percent to 900.00 rupees on institutional buying, dealers said. The stock is down just under 15 percent this year. Drugmaker Dr Reddy's Labs rose 4.9 percent to 1,671.20 rupees after it posted a forecast-beating quarterly profit as robust sales growth in the US offset a sluggish domestic business and higher operational costs.
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