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India shares post best weekly gains in seven weeks on BJP win, Fed stance

MUMBAI (NewsRise) -- Indian shares recorded their best weekly gains in seven weeks as a decisive win by Prime Minister Narendra Modi's Bharatiya Janata party in state elections and the U.S. Federal Reserve's unchanged outlook on interest rates boosted demand.

On Friday, the benchmark BSE Sensex rose 0.2%, or 63.14 points, to 29,648.99, a more-than-two-year high and just a touching distance of 29,681.77, the record level hit on Jan. 29, 2015. The broader NSE Nifty 50 index ended up 0.1%, or 6.35 points, to 9,160.05, its highest ever. For the week, the indices gained 2.4% and 2.5% to record their biggest advances since the week ended Jan. 27.

Foreign investors stepped up purchases of Indian assets as the BJP's clear mandate in Uttar Pradesh, the state that sends the most number of lawmakers to parliament, prompted bets that Modi may push ahead with more economic reforms. Further, the Fed's projection for a gradual increase in rates this year spurred demand for risk assets.

Overseas investors bought a net $1.09 billion worth of shares during the week until Thursday.

"The current buoyancy in the Indian market is largely driven by political & policy certainty," said Vinod Nair, head of research at Geojit Financial Services. "This perhaps has led to foreign fund inflows despite the peak valuations."

Eleven of the 30 constituents ended higher on Friday, while overall declining issues beat advancing ones 1,591 to 1,234 and 196 closed unchanged.

Cigarette maker ITC was the top gainer on the Sensex, rising 4.9% to 281.20 rupees, its biggest jump in ten months, on lower-than-expected tax on cigarettes under the proposed Goods and Services Tax regime. A government panel of central and state ministers late Thursday decided to cap the cess rate on tobacco products at 4,170 rupees per 1,000 sticks.

"While the final levy on tobacco products will be high, the cap will ensure two things," said Amarjeet Maurya, a research analyst at Angel Broking. "Firstly, it will ensure that the uncertainty surrounding the peak cess on tobacco products will end once and for all; secondly, this cap also means that they have not exactly been classified as sin products."

Financial stocks, which have the biggest weight in the benchmarks and act as proxy to economic growth, was among the top weekly gains.

Mortgage lender Housing Development Finance Corp. jumped 5.6% for the week after ending little changed at 1,450.75 rupees on Friday. Private lender ICICI Bank gained 2.7% for the week. Friday, it declined 1.3% to 280.75 rupees.

Larsen & Toubro gained 3.9% for the week on expectations of large orders and strong growth in India's engineering exports in February. The shares fell 1.1% at 1,550.70 rupees on Friday.

Bharti Airtel fell 3.7% at 346.80 rupees on Friday, taking its two-day fall to 4.5%, after India's largest mobile phone operator dropped its plan to sell a controlling stake in its tower unit.

Coal India declined 0.8% to 289.75 rupees, taking its weekly decline to 8.5%, as the stock went ex-dividend on Wednesday. The state-run miner's board had approved an interim dividend of 18.75 rupees a share last week.

--Dhanya Ann Thoppil

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