BSE Sensex rises 2.9 pct on global optimism

By Pratish Narayanan

MUMBAI (Reuters) - The BSE Sensex rallied 2.9 percent on Wednesday, its second consecutive rise, as upbeat results from U.S. firms Goldman Sachs and Intel helped shore up investor confidence worldwide.

Traders said higher start for European bourses boosted investor appetite for riskier bets after the market appeared to lose steam due to concerns about the domestic economy and rich valuations.

State-run power equipment maker Bharat Heavy Electricals extended gains after the finance secretary said the government would announce plans to sell small stakes in state firms in 3 to 4 weeks.

"BHEL has received a few orders in the past few days, and these hopes for divestment is driving the stock further," Alex Mathew, head of research at Geojit BNP-Paribas Financial Services, said.

Engineering and construction firm Larsen & Toubro, energy giant Reliance Industries and private-sector lender ICICI Bank powered the main index a day after it rose 3.4 percent, the best in almost 7 weeks.

"We saw some buying by institutions in the latter half of the day, as well as a significant amount of short-covering," Mathew said. "The volume was also more in the afternoon."

The 30-share BSE index ended up 2.88 percent, or 399.54 points, at 14,253.24, its highest close in nearly two weeks, with 29 stocks advancing.

But traders said the market may not be able to sustain gains in the near term, with profit-taking set to emerge unless investors are reassured corporate earnings growth will pick up pace in the next few quarters.