Indian shares ended higher on Tuesday, led by gains in defensive shares including index heavyweight ITC Ltd and as State Bank of India rose after BofA Merrill upgraded the stock.
Traders say markets are now awaiting fresh impetus from the government as it tries to contain the ballooning fiscal deficit and meet its disinvestment target.
Fitch Ratings reiterated on Tuesday its negative’ outlook on India’s sovereign credit rating, citing concerns about slowing economic growth, persistent inflationary pressures and an uncertain fiscal outlook.
Broader earnings outcome of blue chip companies such as Infosys on Friday and Tata Consultancy Services on Monday will set the tone in the coming weeks. Analysts will watch management commentary for direction on the technology sector.
“Third-quarter earnings would be a key focus in the near term, but I don’t expect earnings to give material positives,” said Vijay Kedia, director at private wealth management firm Kedia Securities.
The impact of government policies would be felt only after a few months, Kedia added.
The BSE index rose 0.26 per cent, or 51.10 points, to end at 19,742.52. The broader NSE index ended 0.22 per cent higher, or 13.30 points, at 6,001.70.
Defensive stocks led the gainers on value buying, with cigarette-maker ITC Ltd ending 2.4 per cent higher. Its shares fell 3.9 per cent last month and 2.7 per cent in January till Monday's close.
Drugmakers rose, with Cipla Ltd ending up 1.2 per cent, its all-time highest close at 429.50 rupees. Dr Reddy's Laboratories also ended at a record high 1,908.15 rupees.
Shares of education services provider Educomp Solutions surged 3.2 per cent after announcing the sale of its entire 50 per cent stake in Eurokids International.
State Bank of India shares ended up 1.04 per cent.
Earlier, Bank of America Merrill Lynch upgraded state-owned banks SBI, Bank of Baroda, and Oriental Bank of Commerce Ltd to buy’. The investment bank said the upgrades came on the back of a steepening bond yield curve in anticipation of rate cuts by India’s central bank, stronger-than-expected loan recoveries, and reduced quality pressures.
Among decliners, shares of Larsen & Toubro Ltd fell 1.3 per cent after Citigroup and Barclays downgraded the engineering conglomerate on concerns over order cancellations and weak investment cycle.
Citi downgraded L&T to neutral’ from buy’ and cut its target price to 1,732 rupees from 1,855 rupees, citing cancellations in the second quarter of fiscal 2013, slow-moving orders, as well as a weaker domestic economic growth.
Oil companies fell on profit-taking after a recent rally, with Hindustan Petroleum Corp dropping 1.8 per cent after rising 13.54 per cent in the previous four sessions, while Bharat Petroleum Corp ended 1.2 per cent lower.
Infosys Ltd, India’s second-largest software exporter, fell 1.3 per cent on investor caution ahead of December quarter earnings on Friday.
Infosys was trading at a 36 per cent discount to its 10-year median P/E, the widest gap among large-cap Indian technology stocks, according to Thomson Reuters’ StarMine estimates.