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Sensex hits 7-month closing high, ends above 18,000

Source : REUTERS
Last Updated: Wed, Sep 12, 2012 12:01 hrs
Brokers react while trading at a stock brokerage firm in Mumbai

The BSE Sensex rose for a sixth consecutive session to close at its highest since February 23 on rising hopes for government reforms after the aviation minister signalled the country was moving to allow foreign direct investment into the sector.

Allowing foreign carriers to invest in the sector would help cement expectations for further government action, with investors also hopeful India will open up the multi-brand retail sector and raise fuel prices to lower its subsidy burden.

Gains in local shares on Wednesday also tracked a risk-on mood globally, after Germany's top court backed the legality of the euro zone bailout funds, although with conditions.

Investors are also hopeful the Federal Reserve will announce new U.S. asset purchases when it concludes its two-day meeting on Thursday, although some analysts warned of the dangers of relying on liquidity that is driven by global risk factors.

"The path is laid for FDI in aviation to go through,"said Ambareesh Baliga, chief operating officer at Way2Wealth Securities.

"International cues such as German court ruling are triggers which will take the market up for a while. But markets cannot sustain those higher levels unless you have a fundamental domestic reason to keep it up," Baliga added.

0.82 percent to end at 18,000.03 points, just above the psychologically key level of 18,000 points.

The Nifty rose 0.76 percent to mark its highest close since March 14.

Data on Wednesday showing India's industrial output rose 0.1 percent in July, just below expectations for a 0.3 percent increase, had little impact in markets.

Instead, investors cheered comments from India's civil aviation minister Ajit Singh saying he had talked to most of the government's political allies on opening up the sector, raising hopes action could be near.

Policy reforms are seen key for a country facing ratings downgrades into sub-investment grade.

HSBC downgraded Indian stocks to "underweight" from "neutral" on Wednesday, citing the government's lack of progress in fiscal or structural reforms as a key factor.

AIRLINES SURGE

SpiceJet Ltd gained 7.12 percent, its biggest percentage gain since August 7.

Under current rules, foreign airlines are barred from buying stakes in domestic carriers, although foreign investors are allowed to hold a cumulative 49 percent.

Kingfisher Airlines , which has been reeling under heavy debts, advanced 8 percent, while Jet Airways rose 4.85 percent.

Shares in Tata Motors gained 5.38 percent, marking a sixth day of gains on anticipation of a boost in sales when the auto maker releases a fourth-generation Range Rover in October.

Shares in Gujarat State Petronet Ltd gained 3.8 percent, after Petroleum & Natural Gas Regulatory Board (PNGRB) cuts tariffs to transport gas via high pressure networks in the state of Gujarat by less than expected.

Apollo Tyres jumped 6.46 percent to 99.65 rupees, after Bank of America-Merrill Lynch raised its target price to 135 rupees, predicting profit margins would continue to improve on the back of a better sales mix and pricing discipline, among other factors.

However, shares in Reliance Mediaworks dropped 2.6 percent on worries about its loan exposure after Digital Domain Media Group Inc filed for bankruptcy protection.

Shares in the Indian unit of Siemens fell 2.7 percent after the German company sold 1.1 pct of its stake via 8 block deals.

Siemens had been looking to sell about a 1.2 percent stake in a deal meant to raise up to $50 million, according to a term sheet seen by Reuters on Tuesday.

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