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Markets

Indian shares jump amid bets new central bank chief less hawkish

Financials gain, while Dr. Reddy's slips after report on court ruling for opioid addiction treatment

MUMBAI (NewsRise) -- Indian shares recorded their best gain in six weeks on Wednesday, as some market participants viewed the new head of the nation's central bank as less hawkish than his predecessor.

The BSE Sensex advanced 1.8% to 35,779.07 and the Nifty 50 Index ended 1.8% higher at 10,737.60. Kotak Mahindra Bank and Yes Bank led lenders higher, rising 1.5% and 5.3%, respectively. Indiabulls Housing Finance jumped 5.6%, while Bajaj Finance rose 2.6%, pacing advances among non-banking lenders. Dr. Reddy's Laboratories closed 4.7% lower. The drugmaker will have to "wait a little longer" before it can start selling a generic version of an opioid addiction treatment, a U.S. appeals court ruled on Tuesday, according to Bloomberg.

The Indian government on Tuesday named former economic affairs secretary Shaktikanta Das as the Reserve Bank of India's new governor, a day after Urjit Patel resigned from the position, citing personal reasons. Patel's resignation follows months of reported disagreement between the central bank and the government on lending practices for debt-laden public sector banks and the use of the RBI's surplus reserves.

The move had raised questions over the independence of the RBI, an issue analysts said the new head will have to address.

Anindya Banerjee, deputy vice president for currency and interest rate derivatives research at Kotak Securities, said while Das may be able to "smoothen ruffled feathers" between the nation's finance ministry and the RBI, the risk is that the market could see his appointment as a "direct attack on the independence of the central bank." Analysts at Nomura and Rabobank also flagged uncertainty over concerns over the RBI's independence.

Nomura said Das likely stood on "the neutral-to-slightly dovish spectrum" on monetary policy, while Rabobank and HSBC Securities and Capital Markets expressed a similar view.

Rabobank said that under the new governor, the RBI is likely to shift away from a hawkish policy stance, while Nomura and HSBC Securities said that the RBI could change its stance from "calibrated tightening" to "neutral" early next year.

India's rate-setting Monetary Policy Committee raised rates twice while Patel was at the helm.

The Sensex's best session since Oct. 29 was helped further by positive regional leads amid hopes that trade tensions between U.S. and China were set to ease. U.S. equity index futures pointed to a higher opening for Wall Street on Wednesday, while Hong Kong led regional equities higher following Beijing's reported agreement to cut tariffs on U.S.-built cars, auto parts and President Donald Trump's optimistic remarks on trade talks with China.

In an interview with Reuters, Trump said he was willing to have another meeting on trade with Chinese leader Xi Jinping, whom he "likes a lot and gets along with very well." On Twitter, the President remarked that "very productive conversations" were going on with China.

In other major movers on the BSE, Sun Pharmaceutical Industries advanced 2.3% to 431.30 rupees. Nomura upgraded shares of India's most valuable pharmaceutical company to "buy," citing favorable risk-reward conditions after a recent correction.

Hindalco Industries rose 2.4% and Vedanta advanced 3% amid prospects of easing trade worries, which could improve outlook for industrial commodity producers.

Aditya Birla Fashion & Retail jumped 9% to 200.30 rupees. CLSA raise its target price on the shares to 240 rupees and maintained its "buy" rating, citing multiple growth triggers through March 2021.

Auto companies were among the major gainers. Hero MotoCorp was the top performer in percentage terms on both the Sensex and the Nifty 50, adding 7%, while Bajaj Auto ended 3.7% higher.

--Nimesh Vora

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