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Mumbai: Indian shares bounced 4.6 per cent on Wednesday to their highest close in two weeks, as oil drifted away from record highs and the withdrawal of Left parties from the ruling coalition was seen as helping economic reforms.
Reliance Communications rose 6.2 per cent to Rs440.95, its best close since June 30, after South Africa's MTN and the No 2 Indian mobile firm said they had agreed to extend their exclusive talks for a tie-up.
Financial stocks led by No 2 lender ICICI Bank rebounded, as investors expected the drop in oil prices would ease the pressure on the central bank to tighten policy.
"Two of the biggest worries for the market seem to be settling," said Nikunj Doshi, investment manager at Envision Capital. "Oil is easing and political uncertainty is almost over."
Oil was trading above $137 a barrel after falling more than $5 on Tuesday.
The benchmark 30-share index jumped 614.61 points to 13,964.26, its highest close since June 26, with all its components rising.
Merrill Lynch said the withdrawal of communists from the ruling coalition would enable quicker economic reforms.
"This could come in the form of disinvestments, a hike in foreign limits in sectors such as insurance, allowing FDI in retail," it said in a note.
A regional party, whose support appears crucial for the survival of the government, said on Tuesday it would not be "rigid" on economic issues but wants a mechanism through which it can influence policy making.
The communist parties that have provided India's government with a parliamentary majority for four years said on Tuesday they were withdrawing their support to protest a civilian nuclear energy deal with the United States.
In the broader market, gainers led losers four-to-one on volume of 335 million shares.
Top private firm Reliance Industries gained 5.1 per cent to Rs2,079.95, after falling 3.5 per cent in the previous two sessions.
Bellwether Infosys Technologies rose 4.9 per cent to Rs1,821.10 on speculation the No 2 software services exporter would raise its full-year revenue outlook when it releases results tomorrow.
ICICI rose 4.7 per cent to Rs621.90 as investors bought into beaten down bank stocks that have lost more than half their value in 2008. The BSE Bank index closed up 4.9 per cent.
Reliance, Infosys and ICICI constitute nearly a third of the the weightage of the main index.
The 50-share NSE rose 4.2 per cent to 4,157.10 points.
Rupee climbs
The Indian rupee climbed yesterday as signs of political stability, a 4.6 per cent surge in the share market and lower crude prices offered some respite to worries about fund outflows and a widening trade deficit.
The partially convertible rupee ended at 43.12/13 per dollar, 0.3 per cent stronger than Tuesday's close of 43.26/27. It had hit a 15-month low of 43.50 last week.
"Oil prices are also holding below $139, so the rupee should trade fairly steady for a while," he added.
The communist parties that have provided India's government with a parliamentary majority for four years have withdrawn support to protest against a civilian nuclear energy deal with the United States. The government believes it has enough votes to survive a no-confidence vote after securing the backing of a regional party.
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