Sensex logs 7th consecutive weekly rise

Power equipment maker Bharat Heavy Electricals Ltd closed 6.7 percent higher at 303.55 rupees, after rising as much as 14.3 percent to its highest level in three months, as investors bet on a rise in orders this year.

State-run NTPC Ltd plans to award $3.25 billion of equipment orders by March-end after a ruling by the Supreme Court settled a case with a bidder in favour of the country's top power producer, its chairman said on Thursday.

The 30-share BSE index closed up 0.75 percent, or 135.36 points, at 18,289.35, its best close in more than six months. Nineteen of its components ended in the positive territory.

"The global liquidity conditions have improved in the last couple of months and India is benefitting from fewer investment opportunities in the developed markets," said Claugio Bernasconi, a Switzerland-based fund manager for AMC Expert India Fund.

"Although a bounceback was expected after the Indian markets became the worst performer last year, I am turning cautious now because this sudden and strong rally is not supported by any improvement in the fundamentals of the country."

Technical indicators show the benchmark index could be ripe for a correction as it is deep in "overbought" territory, with its 14-day relative strength index at 77 on Friday. A score of 70 and above is considered overbought.

Citigroup said in a research report the Indian market rally was mainly driven by overseas inflows with "relatively little evidence" of retail participation, though the domestic economy or the corporate sector outlook have not changed much.

Indian economic growth has lost momentum as lingering euro zone debt woes, coupled with high domestic interest rates and a policy paralysis at home have hit capital investments by companies.

LIQUIDITY-BACKED RALLY

The government earlier this month cut its economic growth forecast for the current fiscal year to 6.9 percent, the slowest pace in three years. The GDP data for the October-December quarter is due on February 29.

"We argue that while the macro and the market have moved favorably -- the economy/corporate sector have to play catch up, and deliver in earnings, investment, expansion and risk appetite," Citigroup analysts wrote in the research note.

"We like this rally ... but such sharp, liquidity-backed and 'going with the flow' kind of investor and inflow momentum can be a scary thing," they said, adding the brokerage retained its year-end BSE index target of 18,400 despite the current rally.

Shares of financials are among the biggest gainers this year, as the Reserve Bank of India (RBI) is widely expected to start cutting interest rates in the quarter beginning April 1 to stimulate the economy.

The RBI ran a 20-month interest rate tightening cycle until October to slow down inflation, hitting credit demand and asset quality of banks.

Top lender State Bank of India rose 2.8 percent to 2,417.05 rupees and No. 2 ICICI Bank closed with a gain of 1.3 percent at 981.60 rupees. Third-ranked HDFC Bank advanced 0.4 percent, while the sector index rose 1.4 percent.

Reliance Communications Ltd rose as much as 4.3 percent. Sources told Reuters the No. 2 mobile operator has hired two more banks for the planned $1 billion IPO of its undersea cable unit.

The broader 50-share NSE index ended up 0.77 percent at 5,564.30 points. In the broader market, 803 losers were slightly ahead of 671 gainers on relatively strong volume of more than 1.4 billion shares.

STOCKS THAT MOVED

Suzlon Energy fell 1.4 percent to 29.05 rupees. JPMorgan downgraded the wind turbine maker to "underweight" from "neutral" and cut its target price to 20 rupees from 61 rupees, citing worries over its dollar bonds repayment obligations.

Man Industries rose 2.8 percent to 112.55 rupees after the company said it got orders worth 5 billion rupees, taking its total order book to 16 billion rupees.

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