BSE Sensex edges higher; Fed meeting key

Indian stock brokers watch the key Sensex share index graph in a brokerage firm in Mumbai May 13, 2004.

MUMBAI (Reuters) - The BSE Sensex edged higher on Wednesday as power equipment makers such as Larsen & Toubro gained on hopes the government would consider imposing import duties for foreign makers.

Gains in Asian indexes contributed to a more optimistic mood as investors hope the Federal Reserve will announce monetary stimulus later in the day, possibly in the form of additional U.S. bond purchases.

Meaningful U.S. action could boost emerging market assets such as in India, offsetting some of the concerns about euro zone debt woes.

After strong gains in June, Indian stocks were hit hard on Monday after the central bank kept interest rates on hold, putting the focus on the government to step in with measures to address concerns about India's fiscal and economic outlooks.

"Market is in a wait and watch mode. Nobody is in a mood to give any commitment. Slowdown is here to stay until and unless liquidity wave comes from U.S and Europe," said Jagannadham Thunuguntla, head of Research at SMC Investments.

The BSE Sensex rose 0.22 percent to 16,896.63 points, to mark its second consecutive session of gains.

The broader 50-share NSE index provisionally rose 0.33 percent to 5,120.55 points.

Gains were led by power equipment makers as the power minister is expected to submit a new proposal for a potential import tax on foreign imports to a cabinet of ministers, according to two government sources.

Domestic power makers have requested import duties for the past two years to curtail the supply of cheaper equipment from China.

Larsen & Toubro (LART.NS) gained 0.9 percent, while BHEL (BHEL.NS) rose 1.6 percent.

Also gaining on Wednesday, Indian airlines advanced on TV reports the civil aviation ministry will meet with finance ministry counterparts to discuss lowering aviation turbine fuel taxes, raising hopes of an announcement, traders said.

Kingfisher Airlines surged 6.2 percent, while Jet Airways (JET.NS) surged 5 percent. Spicejet (SPJT.BO) rose 3.8 percent.

Shares in Educomp Solutions Ltd (EDSO.NS) rose 11.2 percent after the company said it has raised $155 million via external commercial borrowings, of which it plans to pay off foreign currency convertible bonds (FCCBs) worth $78.5 million.

Cement maker shares such as Ambuja Cements (ABUJ.NS) and ACC (ACC.NS) recovered strongly after initially dropping on media reports that the Competition Commission of India would soon impose fines over alleged price collusion in the industry.

Though the CCI had not yet issued a ruling, traders said penalties were unlikely to be so high as to significantly impact cash flows, while they expect the process to lengthen further as companies impacted are expected to appeal.

CCI Chairman Ashok Chawla could not be immediately reached.

Ambuja Cements shares rose 1.4 percent after earlier falling as much as 4.6 percent. ACC shares rose 3.5 percent after losing up to 3.9 percent.

(Additional reporting by Manoj Dharra; Editing by Rafael Nam)