Sensex bounces back, up 158.52 pts

Nifty gains 1%; Revival in European markets, expectations of reform push to FDI in retail boost sentiments.

The Sensex rebounded 1 per cent on Thursday, led by engineering conglomerate Larsen & Toubro and mobile operator Bharti Airtel, after European markets held their ground and raised hopes for a revival in foreign fund inflows.

The market gathered steam in the last 45 minutes of trade after drifting down for most of the day as expectations grew the government will push key reforms to boost business confidence and halt a slowdown in growth.

Retailers, including market leader Pantaloon, rallied on hopes the supermarket sector will be opened to global players, although the plan hung in the balance as political opposition to the long-delayed reform mounted hours before a cabinet meeting.

Signs of stabilisation in the rupee also helped the market pull back, a day after the benchmark stock index had skidded to its lowest close in more than two years.

“The rally in Europe helped, plus there are big expectations of a reform push for foreign direct investment (FDI) in retail,” said Gajendra Nagpal, chief executive at Unicon Financial Intermediaries in Delhi. “If the government delays, that will not go down well with investors,” he said.

The Sensex closed up 1.01 per cent, or 158.52 points, at 15,858.49, after swinging to a trough of 15,479.97. All but five of its components closed in the green.

Pantaloon Retail jumped 12.6 per cent to its highest close in more than six weeks, while Vishal Retail surged 8.6 per cent and Shoppers Stop added 5.5 per cent.

Indian retailers are hopeful that the opening of the sector to foreign players will spark joint ventures and investment from global operators that will be required to team up with local players. A Carrefour link-up with Pantaloon has long been anticipated. The cabinet will meet at around 1230 GMT in New Delhi to discuss the planned opening up of the retail sector to foreigners.

Opening up the retail sector would be one of the boldest moves to come from Prime Minister Singh’s government, which has been tripped up by a string of corruption scandals over the past year and mired in a policy paralysis at a time of slowing economic growth.

Multinationals such as Wal-Mart Stores Inc have eyed India for years as the last frontier in mass retailing – a market estimated at $450 billion a year, but still dominated by traditional family-run and corner stores. India currently allows 51 per cent foreign investment in single-brand retailers and 100 per cent for wholesale operations.

The rupee has slumped more than 14 per cent against the dollar this year, with most of the losses coming in the last three months, as investors cut exposure to riskier assets amid Europe’s raging debt crisis, fears of a global recession and signs of a domestic economic slowdown.

It hit an all-time low y on Tuesday but has since found support from the Reserve Bank of India and companies have resumed cashing in their dollar earnings.

The rupee’s fall and hopes for stabilisation makes Indian stocks more attractive for foreign portfolio investors, but they will still wait for a ‘comfort level’ before pumping in cash, Nagpal said.

The central bank has raised rates 13 times since early 2010 to rein in inflation and the moves have dented consumer spending, investments by companies and slowed growth.

The 50-share NSE index, Nifty, gained 1.06 per cent to 4,756.45. In the broader market, there were 824 gainers beating 617 decliners on heavy volume of about 835 million shares.

European shares rose on Thursday morning, helped by bargain hunting after losing 7 per cent over five sessions, and with a survey that unexpectedly showed German business sentiment rose in November improving sentiment.