10:00AM New York, 7:30PM Mumbai - Indian shares rebounded 5.4% on optimistic outlook for the political settlement for the UPA led coalition government.

Market Sentiment

Indian shares staged a firm recovery on Wednesday on hopes that the Congress-led United Progressive Alliance government may retain power with a backing from a regional party Samajwadi Party that does not oppose the controversial nuclear deal with the U.S.

Communist parties are on the verge of withdrawing their support to the government over Indo-US nuclear deal. The Samajwadi Party has 39 seats in parliament, compared with 59 seats for the communist parties. The ruling coalition needs the support of 44 lawmakers to reach a majority and it hopes to also win support from a few smaller parties.

Rising crude oil prices, elevated inflation numbers and higher interest rates and political uncertainty have weighed on India markets over the past few days.

The 30-share BSE Sensex gained 5.4% or 702.94 at 13,664.62. On the National Stock Exchange, the CNX Nifty index rose 5.1% or 196.6 at 4,093.35.

Of the BSE traded shares, 1,586 shares rose, 1,094 shares declined and 57 shares remained unchanged.

Of the Sensex index shares, 28 stocks gained and 2 stocks declined.

Trading statistics

Reliance Natural Resources clocked the highest volume on BSE followed by IFCI, Reliance Petroleum, Ispat Industries and Chambal Fertilisers and Chemicals.

Reliance Industries was the most active stock on the BSE with the trading turnover on 470.28 crore rupees followed by Reliance Capital, Reliance Petroleum, Reliance Infrastructure and Reliance Natural Resources.

Gainers and losers

Realty stocks surged in late trade. DLF rose 15.1% to 423.95 rupees after the company said its board will meet next week to consider proposal for buyback of equity shares of the company.

Unitech gained 7.2% to 171.10 rupees and Indiabulls Real Estate climbed 14.3% to 286.20 rupees.

Consumer durables stocks rose. Videocon Industries closed up 11.2% to 282.15 rupees, Rajesh Exports rose 9.1% to 54.70 rupees and Titan Industries surged 4.3% to 1,043.20 rupees.

Capital goods stocks rose. Bharat Heavy Electricals advanced 5.2% to 1,426.25 rupees, Larsen & Toubro rose 7.3% to 2,297.15 rupees and Suzlon Energy gained 1.8% to 199.45 rupees.

Banking stocks rose after recent steep fall. HDFC Bank gained 5.7% to 1,020.55 rupees, State Bank of India was up 5.3% to 1,079.25 rupees and ICICI Bank surged 5.7% to 623 rupees.

Recently most of the banks had raised their lending rates after the Reserve Bank of India tightened monetary policy last week for the second time in a month to tame inflation.

Software shares rose as rupee hovered near 15-month low against the dollar. Satyam Computer Services gained 7.2% to 463.30 rupees, Infosys surged 6.5% to 1,820.60 rupees and Wipro rose 5.7% to 439.90 rupees.

A weak rupee augurs well for IT companies as they derive majority of their revenue from exports to the US.