Sensex extends post-poll rise

Prime Minister-elect Manmohan Singh vowed on Tuesday to revive growth and spread the benefits of economic expansion that swept his coalition back to power with a decisive mandate in a general election.

The two-day percentage rise was the biggest since a 25.9 per cent jump in March 1992 after Singh,who was then finance minister,unveiled a reform budget that opened the economy to foreigners.

State Bank of India and explorer ONGC extended the previous day8217;s sharp gains as traders bet the Congress party-led coalition may sell holdings in state companies to help fund spending plans and plug a large budget deficit.

Larsen amp; Toubro was a major gainer,adding 8.8 per cent to Monday8217;s 25 per cent jump,as investors expected the leading engineering conglomerate to benefit from a government drive to update the country8217;s creaking infrastructure.

However,outsourcers such as Infosys Technologies and Wipro that depend on exports for more than half their revenue fell as a jump in the rupee8217;s value against the dollar was seen affecting their profitability.

The 30-share BSE index,or Sensex,rose 0.12 per cent,or 17.82 points,to 14,302.03,its highest close in more than eight months. The benchmark swung widely,rising as much as 4.5 per cent and falling 3.1 per cent at one stage.

8220;It is very important that some caution set in today,8221; said Hitesh Agrawal,head of research at Angel Stock Broking.

8220;Yesterday was just an act of desperation as domestic and foreign funds had to catch up to the recent rally.8221;

Eighteen index stocks advanced,while in the broader section,gainers led losers in the ratio of more than 2.5:1 on heavy volume of 906.9 million shares.

On Monday,trading was restricted to just a few seconds after the benchmark jumped 17.3 per cent,its biggest rise in almost two decades,triggered circuit breakers and shut down the market. Volume was paltry at about 13 million shares.

The index has gained 77.7 per cent from 2009 lows in early March as foreign funds moved 4 billion into the market over the past two months. This has taken its gains for the year to 48 per cent,after losing more than half its value in 2008.

Even though the surge has raised concerns the market may have become overbought,analysts predicted a steady rise over the long term.

Foreign funds will be encouraged to invest more with a stable government that is not shackled by former allies such as the communists,analysts said.

8220;Over the next nine to 12 months,the Sensex could reach anywhere between 14,750 to 16,000 on the upper end of the scale. If for some reason the market falls,12,000 to 12,500 will be a very good support,8221; Agrawal said.

Top outsourcer Tata Consultancy Services shed 8.15 per cent to 672.15 rupees,while No. 2 player Infosys eased 11.65 per cent to 1,563.75 rupees.

The IT sector index lost 10.1 per cent after putting on 11.4 per cent on Monday. Software-services firms get most of their revenue in US dollars and a 3.2 per cent surge in the rupee on Monday can hurt their profit margins.

Drug maker Ranbaxy Laboratories,which also depend on generic exports,fell 6.4 per cent to 209.75 rupees.

Energy giant Reliance Industries,which has the most weight in the main index,fell 5.25 per cent to 2,235.40 rupees after soaring 20 per cent on Monday.

State-run companies were fancied as the government was expected to jump-start asset sales that had been stalled by the ruling coalition8217;s former communist allies suffered a big defeat in the elections.

Initial public offerings by Indian companies are expected to end a 15-month drought and make a comeback,led by state-run firms.

Leading lender State Bank of India gained 11.2 per cent to 1,754.45 rupees,while ONGC climbed 5.3 per cent to 993.65 rupees.

The 50-share NSE index edged down 0.1 per cent to 4,318.45.