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Indian shares rise on State Bank of India's earnings, crude recovery

MUMBAI (NewsRise) -- Indian shares rose Friday, as a rebound in crude prices lifted global risk appetite and as the nation's largest lender jumped after posting a smaller-than-expected rise in bad loans.

The benchmark BSE Sensex rose 1.1% to 28,152.40 points, ending the week little changed. For 2016, the index is up 7.8%. The broader NSE Nifty50 index advanced 0.9% to 8,672.15 points.

State Bank of India, Reliance Industries, Tata Motors, Larsen & Toubro and Housing Development Finance Corp advanced Friday, while Cipla, Infosys and Asian Paints slid.

India's largest bank SBI rose 7.2% to 243.20 rupees to its highest levels this year, registering its biggest single-session percentage advance in five months, after it reported a narrower-than-expected 32% decline in profit.

The lender's gross non-performing assets stood at 6.9%, compared with 6.5% in the January-March quarter, a deterioration that wasn't as bad as other major state-run banks and smaller than what analysts had feared. SBI's provisions for bad loans declined to 63.4 billion rupees in the June quarter from 121.39 billion rupees in the prior quarter.

Bank of Baroda, the second largest state lender, had reported an over one percent worsening in gross non-performing assets quarter-on-quarter.

"SBI's performance in terms of asset quality is quite comforting and considering the reasonable valuations the stock is trading at, we could see further upside on the lender," said G. Chokkalingam, Managing Director at Equinomics.

Investors have been worried about banks' bad debt, especially after the Reserve Bank of India's more comprehensive method of reviewing asset quality sparked a significant increase in provisioning requirements in the prior two quarters.

Global risk appetite was also upbeat as crude prices rallied over 4% Thursday, registering its biggest single-session advance in over a month. Hopes of production cuts resurfaced after the Saudi Arabian energy minister said that the top producer was willing to take steps to stabilize crude prices. The benchmark Brent crude oil contract was last down 0.6% at $45.77 per barrel.

All three major U.S. indexes, S&P 500, Dow Jones Industrial Average and NASDAQ Composite, rose to lifetime highs yesterday.

Most other Asian markets rose Friday, tracking Wall Street. Hong Kong's Hang Seng advanced 0.8%, China's Shanghai Composite index rose 1.6% and Japan's Nikkei 225 index ended 1.1% higher. South Korea's KOSPI ended little changed.

On the Sensex, 22 of the 30 constituents ended higher Friday, while overall declining issues outnumbered advancing ones 1,392 to 1,264 and 182 closed unchanged.

The rally in SBI sparked gains in private lenders ICICI Bank and Axis Bank, lifting them 1.5% to 245.95 rupees and 4% to 590.75 rupees. The BSE Bankex was among the best performing major sectoral indexes today, advancing 2%.

Automakers Tata Motors and Mahindra & Mahindra rose 2.6% to 515.25 rupees and 2.1% to 1,450.85 rupees after reports that the nation's top court lifted a ban on the registration of large diesel cars in New Delhi imposed last December.

Larsen & Toubro ended 1% higher at 1,488.40 rupees. The engineering conglomerate had fallen 2.5% this week till Thursday.

Industrial conglomerate Reliance Industries rose 2.2% to 1,034.95 rupees, while home mortgage provider HDFC advanced 2.2% to 1,378.60 rupees. The two index heavyweights are up 2% and 2.8% for the week.

Aluminum and copper producer Hindalco Industries jumped 2.8% to 146.20 rupees after it reported a five-fold jump in first-quarter profit.

Sun Pharmaceutical Industries declined 0.9% to 801.80 rupees. The stock rose as much as 2% after it reported better-than-expected June quarter earnings, but failed to hold onto gains.

Cipla declined 1.3% to 516.65 rupees Friday. Shortly after markets closed, the nation's fifth-largest drugmaker reported an over 40% decline in first-quarter profit, missing market expectations.

Infosys fell 1.3% to 1,063.30 rupees. The software services provider is now near the lows touched on June 15 when it reported June quarter earnings and cut its dollar revenue guidance.

Paint maker Asian Paints ended 0.6% lower at 1,137.95 rupees, giving up a part of Thursday's 1.3% advance.

Grasim Industries, part of India's third largest business group Aditya Birla and a constituent of the broader Nifty50, ended 0.6% higher at 4,565 rupees. On Thursday, Aditya Birla Group unveiled a plan to merge its units Grasim and Aditya Birla Nuvo, and hive off its financial services unit into a separate listed entity. Aditya Birla Nuvo shares fell 17.6% to 1,290.15 rupees.

Analysts expressed concerns about the complex structure of the combined entity.

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