Indian shares snapped a three-session losing streak and rebounded 1 percent on Wednesday as investors returned to risky assets after China's economic growth data allayed some concerns over a global slowdown even as eurozone debt worries lingered. Financials contributed the most to the gains on the BSE main index. The banking sector index advanced 1.1 percent, but is still down 5.5 percent in 2011, hurt by rising interest rates.
The 30-share BSE index climbed 184.40 points to 18,596.02 points, with 26 components closing in the green. It had declined 3.5 percent over the past three sessions. The 50-share NSE index gained 1.1 percent to 5,585,45. "For the moment, money is flowing into emerging markets like ours, when other options seem to have dried up for FIIs (foreign institutional investors)," said Gajendra Nagpal, CEO of Unicon Financial.
Foreign funds have bought shares worth $2.6 billion over 13 sessions to Monday as global appetite for emerging markets revived. Also, there was less conviction in the rally as persistently high domestic inflation and a slowdown in economic growth in Asia's third largest economy weighed.
India's factory output in May expanded at its slowest pace in nine months, data on Tuesday showed, even as the country braces itself for another rate increase this month to douse inflation pressures. China's annual gross domestic product grew 9.5 percent in the second quarter of 2011, above a forecast by a Reuters poll, despite a spate of monetary tightening measures from Beijing.
"We tend to rise on somebody else's good news, and then fall because we lack the strength," said Arun Kejriwal, director of research firm KRIS. "The issues in India are grave enough. Investors need to be cautious. Also, earnings season had a bad start with Infosys failing to impress," Kejriwal said.
Infosys extended Tuesday's 4.4 percent decline and slid a further 0.5 percent to 2,777.30 rupees, after the software bellwether narrowly missed quarterly earnings expectations and warned it faces a volatile global economy and a possible slowdown in client spending. Goldman Sachs cut its 12-month target price on Infosys to 3,330 rupees from 3,520 rupees earlier. It maintained its "buy" rating on the stock. Sector leader Tata Consultancy Services, which reports earnings on Thursday, gained 0.3 percent. Third-ranked Wipro dropped 0.3 percent.
Sugar makers rallied as world sugar prices shot up. Shree Renuka Sugar, Dhampur Sugar and Balrampur Chini rose between 3.7 percent to nearly 4 percent. White sugar futures hit a record peak on Tuesday and raw sugar jumped more than 5 percent as fears of a shrinking cane crop from the world's No 1 producer, Brazil, spurred investor buying. Leading lenders State Bank of India, ICICI Bank and HDFC Bank firmed between 0.7 percent and 1.6 percent. Around 496 million shares changed hands on the NSE, lower than the 90-day daily average volume of 580 million shares. The market breadth was positive with more than three shares advancing for every share that declined.