BSE Sensex near 16-mth high; Tata Steel rallies

By Ami Shah

MUMBAI (Reuters) – The BSE Sensex rose 1.35 percent on Wednesday to its highest close in almost 16 months, as signs of a U.S. economic recovery added to the upbeat hopes for robust quarterly earnings.

Traders said Federal Reserve Chairman Ben Bernanke's comment that the U.S. recession was probably over was a shot in the arm for increased fund flows into riskier assets such as equities.

Foreign funds have moved over $9 billion into Indian stocks this year, with more than $700 million coming in so far this month.

Tata Steel, which owns Europe's second-biggest steel maker Corus, was the top gainer in the main index on expectations a U.S. recovery would boost demand.

The share jumped 8.2 percent -- its biggest one-day rise in more than three months -- to 531.60 rupees, its best close in a year.

"Tata Steel looks good on the recent rise in Corus' product prices and the improvement in the unit's operating capacity to 70 percent from 50 percent in the first quarter," said Eric Martins, senior research analyst at Systematix Shares.

The 30-share BSE index added 1.35 percent, or 222.59 points, to 16,677.04 points, its highest close since May 22, 2008, with 24 components rising.

The benchmark, which rose for a second day, has gained nearly 73 percent since the start of January.

"We are fairly valued at this point in time and caution is the word now," said Rajen Shah, chief investment officer at Angel Broking. "We have moved up too aggressively... the market seems to be 6-7 months ahead of time."

With blue-chip index more than doubling from its March low last week, he said the mid-cap stocks were relatively better picks.

Banks were among the big gainers after advance taxes paid by companies for the September quarter pointed to stronger profits.

State Bank of India rose 4 percent to 2,089.60 rupees and ICICI Bank gained 3 percent to 867.55 rupees.

Metal producers Sterlite Industries firmed 3.7 percent to 771.05 rupees while Hindalco climbed nearly 5 percent to 131.30 rupees.

In the broader market, gainers outnumbered losers in the ratio of 1.3:1 on relatively good volume of 571 million shares.

The 50-share NSE index closed 1.4 percent higher at 4,958.60.

World equities rose to 11-month highs, and U.S. stock futures pointed to a stronger opening on Wall Street.

MAIN TOP 3 BY VOLUME

* NHPC on 42 million shares

* Ispat Industries on 20.3 million shares

* Spicejet on 19.9 million shares

STOCKS THAT MOVED

* Drug maker Orchid Chemicals & Pharmaceuticals Ltd leapt a fourth to 157.85 rupees after the U.S. Food and Drug Administration approved its piperacillin-tazobactam antibiotic in injection forms, with a 180-day marketing exclusivity.

* Cummins India closed down 2.1 percent at 359.65 rupees after the engines maker said workers at its Pune production facility were on strike from Sept. 15 demanding re-opening of a six-month-old wage agreement. Link...