The BSE Sensex nudged higher for the first time in four sessions on Tuesday, largely helped by gains in beaten-down energy giant Reliance Industries and export-driven software firms following firmer world markets.
Investors were unconvinced the market could sustain the rise, given stubbornly high inflation, rising interest rates and slowing growth, traders said.
The 30-share BSE index closed up 0.31 percent or 53.67 points at 17,560.30 points, paring gains of more than 1 percent at one stage. Half of its components rose.
"There is no incremental buying happening. People are either selling or churning their portfolio," said Sandeep Singal, co-head of institutional equities at Emkay Global Financial Services.
"We could face a funnel effect going ahead," he said, adding slowing sales growth could squeeze earnings.
The benchmark index had dropped more than 2 percent on Monday to its lowest close in four months, extending last week's
2.2 percent slide, on investor jitters India may slap taxes on investments from companies or funds registered in Mauritius, a popular route for portfolio inflows.
Finance Minister Pranab Mukherjee said on Tuesday the country has resumed talks with Mauritius on reviewing a double taxation avoidance agreement.
Foreign funds have dumped around $410 million of shares in six sessions to June 17, as the near-term market prospects looked bleak.
"Macro headwinds, rising interest rates are weighing on banking and auto sector. Other sectors are hit as well as loans get expensive," Singal said.
Greece's debt woes has also reduced global risk appetite and triggered outflows from emerging market equities.
Software services companies that get most of their revenue from exports gained, with Tata Consultancy Services rising 3.5 percent after issuing a rebuttal to a CLSA downgrade.
"On the matter of macro worries, we are not seeing any weakening of demand. Clients continue to fund new projects and ramp-ups are proceeding smoothly," TCS said in a mail to investors in a rare response to change in brokerage ratings.
Rival Infosys Technologies firmed 0.7 percent.
On Monday, CLSA had downgraded TCS and Infosys to "underperform" from "outperform", citing weaker revenue outlook and travel visa issues. It also downgraded the software sector to "underweight" from "neutral".
Reliance Industries, which has the highest weight on the main index, climbed 1.9 percent on bargain hunting. It is still down nearly 20 percent in the year to date.
GTL and GTL Infra, which had both slumped in the previous session on concerns about debt repayment, pledged shares and fund raising, extended losses despite the chairman's assurances it had not defaulted and that its business fundamentals remain strong.
Telecom network services provider GTL shed 3.6 percent, adding to the 62.2 percent plunge on Monday, while GTL Infra dropped 1.8 percent following 42.7 percent tumble.
Billionaire Anil Ambani-controlled utility Reliance Infrastructure fell for a second day, losing 2.5 percent, as investors reacted to a decision to drop the stock from the nation's benchmark stock index.
Losers outpaced gainers in the ratio of 1.6:1, on volume of
575 million shares on the NSE, lower than the 90-day daily average volume of 600 million shares.
The 50-share NSE index gained 0.3 percent to 5,275.85.
The MSCI world equity index was up 0.5 percent on the day by 1020 GMT.
Source: in.reuters.com
Ravi Jhawar
Summer Intern-Technical Analyst
DENIP Consultants Pvt. Ltd.
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