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Sensex Edges Higher; Consolidation Seen

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The BSE Sensex edged higher on Tuesday led by gains in defensive and low-beta stocks such as ITC on value buying after recent declines on churning in favour of cyclicals and high-beta stocks on bets of additional government reforms.

A slew of reforms announced this month generated significant interest in India stocks with the Sensex gaining 7.25 per cent and foreign investors pumping in close to Rs 13,220 crore in September so far.

Although analysts expect some consolidation after the trend changing gains this month and as markets head closer to expiry of September derivatives contracts on Thursday, it is seen more as an opportunity to increase exposure in Indian stocks.

"It is definitely consolidation, as markets have lost momentum because of expiry," Hitash Dang, vice-president at Jaypee Capital.

"Government measures have been extremely good, we expect the upward momentum to continue post-expiry," he added.

The benchmark BSE index rose 0.11 per cent, consolidating for the second day after a fast run-up in September on a heavy dose of reform announcements.

The 50-share Nifty rose 0.08 per cent, although finding resistance at the 5,700 level for a third consecutive session.

Deutsche Bank in a report said continuing rupee gains and subdued oil prices will give a 'rare sweet spot' for India, positively impacting the fiscal deficit, and give support to the RBI, which has been waiting for inflation to cool.

The ruling Congress party meets later in the day to decide on changes in the cabinet, which are expected to last until the next general elections in 2014. Traders would be watching the outcome of the meeting to finetune political expectations.

Among defensive stocks, cigarette maker ITC rose 1.9 per cent, while Hindustan Unilever rose 2 per cent.

Among other low-beta stocks, Cipla gained 2.1 per cent on value buying after an 8.7 per cent decline in the last eight sessions.

Shares in UB Group rallied after Diageo Plc said it is in talks to buy a stake in billionaire Vijay Mallya's United Spirits Ltd, reviving an on-again, off-again courtship that would ramp up its presence in the world's largest whisky market.

United Breweries Ltd gained 5.9 per cent, United Spirits gained 8.9 per cent, Kingfisher Airlines Ltd rose 7.9 per cent, while United Breweries Holdings rallied 17.6 per cent.

Barclays in a note said restructuring measures for state electricity boards "fall short of expectations", and will serve as a bailout arrangement, rather than representing tangible reform measures.

BHEL shares ended 2.4 per cent higher, while BGR Energy and Thermax shares fell 0.5 and 0.43 per cent respectively.

Among other decliners, shares exposed to India's state-owned electricity distributors fell as traders chose to "sell on news" of government bailout plan for the cash-strapped utilities saddled with more than $35 billion in debt.

Power sector lender Power Finance Corp <PWFC.NS> fell 1.1 percent, while Rural Electrification Corp fell 2.8 per cent.

Shares in Cairn India fell 3.4 per cent after Cairn Energy was set to sell an 8 per cent stake in its former unit for up to $940 million, in the second such deal in three months.

Shares in Axis Bank fell 2.71 per cent on concerns over credit provided to Indonesia's PT Bumi Resources, whose parent company Bumi Plc launched an investigation into alleged financial irregularities at its Indonesian operations.