March 14, 2012 / 11:43 AM / 6 years ago

Indian shares gain on RBI rate cut speculation

* Indian shares close at near 3-week high
    * Banks power gains on talk of RBI rate cut
    * Railway-related stocks drop after budget

    By Manoj Dharra and Abhishek Vishnoi	
    MUMBAI, March 14 (Reuters) - A rally in banking shares
powered Indian shares to their highest close in almost three
weeks on Wednesday on speculation the central bank may still
deliver a surprise rate cut this week after a key sub-measure of
inflation cooled.	
    Although headline inflation, released on Wednesday, picked
up for the first time in five years, non-food manufactured
inflation, which the central bank uses to gauge demand-driven
price pressures, slowed to a 14-month low. 	
    The split picture on inflation revived talk the Reserve Bank
of India could still deliver a cut in interest rates on
Thursday, after already surprising markets with a 75-basis
points cut in the cash reserve ratio for banks last week.	
    Shares in Indian banks have gained since the CRR cut, which
was intended to ease the pressure on liquidity.	
    But not all analysts expect another move from the RBI.	
    "Policy is being looked upon keenly as to whether it will
stoke up investment cycle, but my belief is that after the CRR
cut, the government will wait for a rate cut," said Nitin
Raheja, director of investment firm AQF Partners.	
    The main 30-share BSE index gained 0.6 percent to
17,919.30 points, marking a fourth consecutive session of gains
and its highest close since Feb. 24.	
    The 50-share index rose 0.6 percent to 5,463.90, the
highest close since Feb. 23.	
    Among individual banks, ICICI Bank ended up 2.6
percent and State bank of India 1.2 percent.	
    Also helping were expectations the federal budget on Friday
could contain beneficial measures to the sector, including
making provisions on non-performing loans tax-deductible,
according to an analyst at a major foreign brokerage.	
    Derivatives data showed fresh long positions were built up
on several banks on Wednesday.	
    Among other gainers, Tata Motors rose 2.5 percent
after unit Jaguar Land Rover said it was boosting U.K.
production of two models, seen as indicating confidence about
sales in the European markets. 	
    But among decliners, railway-related shares dropped as
traders cited disappointment about a lack of more specifics in
the railway budget released on Wednesday, which featured the
first passenger fare hike in eight years. 	
    Titagarh Wagons dropped 4.3 percent, while
Kalindee Rail Nirman Engineers fell 7 percent.	
    Kingfisher Airlines shares dropped 3.6 percent
after its announcement of scaling back overseas flights was
followed by an accusation from the country's aviation regulator
that it was reneging on a recovery plan. 	
    British Airways separately said it had suspended a
code-sharing pact with the cash-strapped Indian airline.	
    	
    (For full list of Indian shares that moved during the day,
please see MARKETEYE items)	
    	
    FACTORS TO WATCH 	
 * Indian rupee report                                    	
 * Indian bond report                                      	
 * Dollar rises broadly, hits 11-mth high vs yen          	
 * Brent oil dips on supply build outlook                  	
 * Brighter outlook boosts global shares, dollar     	
 * U.S. stock index futures signal mixed Wall St opening    	
 * Foreign institutional investor flows         	
 * For closing rates of Indian ADRs                      	
	
  (Reporting by Abhishek Vishnoi and Manoj Dharra; Writing by
Rafael Nam; Editing by Rajesh Pandathil)	
 (abhishek.vishnoi@thomsonreuters.com; +91 22 61807225; Reuters 	
Messaging: abhishek.vishnoi.reuters.com@reuters.net)	
	
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