Ranjit Gangadharan
MUMBAI: Indian shares rebounded on Tuesday after a local court dismissed a
case against the Shiv Sena leader Bal Thackeray, but the rupee resumed its slide
as the impact of the central bank's support package wore off.
The benchmark Bombay index rallied from more than three per cent down in the
morning to over four per cent higher in mid-afternoon before moderating slightly
towards the close.
"It was a trigger to buy in," said one trader from a foreign
brokerage about the court ruling. "Foreign hedge funds are among the
buyers."
A Mumbai judge set free Bal Thackeray just a couple of hours after his arrest
after dismissing the case against him for inciting violence during the bloody
communal riots in 1993, saying it was too old to try.
Thackeray's release sparked buying across the board as fears of unrest in the
city faded and potential problems for Prime Minister Atal Behari Vajpayee's
coalition government, of which the Shiv Sena is the third largest member, also
disappeared.
By 4.00 p.m. (1030 GMT) the benchmark share index was up 3.53 per cent at
4,336.2, up 147.86 points from Monday and off a morning low of 4,052.61.
The market had dropped more than six per cent on Monday, largely in reaction
to the Reserve Bank of India's interest rate increase and liquidity squeeze to
support the rupee.
Rupee weakens
The Indian currency again showed signs of weakness on Tuesday, and at 4:00 p.m.
(1030 GMT) stood at 44.890/910 per dollar, compared to Monday's close of
44.74/75.
The rupee hit a brief low of 44.98 following Thackeray's arrest.
HDFC Bank’s head of equities Abhay Aima said the worst was probably over in
the share markets, and saw little downside risk.
He said concerns about the effects of higher interest rates on the market had
been overplayed and did not see the rupee posing major problems.
Aima said fund managers normally factored in a five per cent depreciation of
the rupee in a year, meaning the current fall of about 2.9 per cent since March
31 should not be a cause for alarm.
The stronger dollar should boost software companies’ revenues as they made
most of their money from exports.
Among the leading gainers on Tuesday afternoon were software stocks Satyam
Computer Services, up 8.0 per cent to Rs 2,610.05, Wipro, up 8.0 per cent to Rs
2,464.05, SSI Ltd., up 10.47 per cent to Rs 2,500, and Infosys Technologies, up
4.78 per cent to Rs 7,120.
(C) Reuters Limited 2000.