10:00AM New York, 7:30PM Mumbai –Mumbai stocks rose despite a rise in inflation. Rupee trades with a downward bias.

Indian Market Update

Indian shares rose on Friday despite a rise in inflation on the hopes that political settlement at the Central government may be reached between Congress party and regional party. Hopes that a political turmoil arising from Indo-US nuclear deal may be averted led a rebound in stocks.

The Indian government is seeking support from a regional party and its bitter rival, Samajwadi Party in Uttar Pradesh to retain power at a time when Communist parties are almost certain to withdraw their support for the government.

Today Samajwadi Party leaders met Prime Minister Manmohan Singh and showed their willingness to support the government if it decides to sign controversial deal with the U.S.

Nuclear deal proposed by the U.S. remains controversial in India and in the U.S. U.S. has demanded several restrictions on the military installations in India and monitoring of civilian power plants by the U.S. authorities. The U.S. agreement will restrict India’s ability to develop new nuclear weapons and put additional restrictions on her ability to counter rising nuclear threat from China and Pakistan. At the same time, the U.S. and China have shown a varying degree of commitment to Pakistan military and defense plans.

As recently as three years ago, the U.S. lent Pakistan nearly $10 billion and wrote off another $5 billion lent to Pakistan under the Paris Club agreement a decade ago. China has been helping Pakistan in building military port at Gawdar location with the help of French and other European nations.

Market Sentiment

The Sensex Index rose 2.8% or 359.89 at 13,454. On the National Stock Exchange, CNX Nifty index rose 2.3% or 90.25 at 4016.

Of the BSE traded shares, 1,696 shares gained, 898 shares declined and 83 shares remained unchanged.

Trading Statistics

Daily turnover on the BSE stood at 5,604 crore rupees and on the NSE.

Reliance Capital was the most active stock on the BSE with a trading turnover of 505.08 rupees followed by trading in Reliance Industries, Reliance Infrastructure and Reliance Natural Resources.

Reliance Natural Resources led the most active list of stocks based on trading volume with a turnover of 2.96 crore shares followed by IFCI, Chambal Fertilisers & Chemicals, Archidply Industries and Reliance Petroleum.

Inflation rises to 11.63%

Wholesale inflation accelerated to 11.63% in late June, largest jump since the tracking of index in 1995. The Reserve bank of India may increase rate for the third time to combat rising inflation and bring it down to its targeted range between 4% and 5%.

The data was leaked early to media, sending the benchmark 10-year bond yield to a seven-year high of 8.99%.

The Reserve Bank of India raised its key-lending rate twice in June, taking it to 8.5%.
The latest read of wholesale price index, India''s most widely watched measure, rose 11.63% in the twelve months to June 21, above the previous week''s annualized rise of 11.42%. Inflation for the week ended April 26 was revised upwards to 8.27% from 7.61%.

The wholesale price index is more closely watched than the consumer price index, which is published monthly, because it covers a higher number of products and is published weekly.

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