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Foreign funds rally Indian shares, lift rupee

By Suresh Seshadri

BOMBAY, Feb 13 (Reuters) - Strong foreign fund inflows lifted India's key share index above the key 6,000 level for the first time in nearly four weeks on Friday, while the rupee rode the wave of money from overseas to a new 3-½ year closing peak.

The 30-issue Bombay index ended up 1.26 percent at 6,011.66 points, a level not seen since the 6,064.10 finish on January 19. That took its gains to four percent for the week.

"Sentiment has improved with sustained buying by foreign and domestic funds," said Ravi Malani, assistant vice president of equity sales at IL&FS Investment.

Foreign funds, which have been lured by prospects of high demand growth and rising earnings in a galloping economy, have pumped in a net $406.5 million into local shares in February. This is on top of purchases of $535 million for all of January.

Asia's third-largest and farm-dependent economy is expected to grow by 8.1 percent in the year to March 2004 following the best monsoon rains in a decade, which have boosted farm output.

The inflows of foreign capital combined with strong trade flows to buoy the rupee to a multi-year high of 45.2325/2375 per dollar, its best finish since 45.1500/1600 on August 1, 2000.

That took the rupee's gains in the week to one-tenth of a percent and the total so far in 2004 to 0.8 percent.

Traders expect the rupee to continue to appreciate in coming weeks and hit 45.00 per dollar by the end of June.

SHARES IN BROAD RALLY

Shares rallied across the board, with gaining issues outpacing losers two to one. Talk of a bonus issue boosted Unilever's Indian unit, Hindustan Lever , the country's largest consumer goods maker. The stock rose 2.7 percent to 202.95 rupees. The company will declare its fourth quarter earnings next Tuesday.

Cement and steel stocks, which led a recent rally on expectations of firmer prices, continued to make gains.

Market leader Associated Cement rose one percent and Gujarat Ambuja , the No 4 producer, gained 1.4 percent.

India's top two steelmakers, state-run Steel Authority of India and Tata Iron and Steel , added almost seven percent and three percent respectively.

Auto stocks added to recent gains after an industry body said passenger car sales jumped by a record 31 percent in January.

Maruti Udyog , majority-owned by Japan's Suzuki Motors and India's largest carmaker, gained 2.6 percent while loss-making Hindustan Motors , maker of the retro-styled Ambassador, jumped 10.4 percent after it said it was in talks to begin contract manufacturing for foreign carmakers.

Technology stocks also joined the party. The New-York listed software services exporters -- Wipro , the No. 3 exporter, and Satyam Computer , the No. 4 -- added three and two percent each.

Worries over a sticky inflation rate depressed sentiment in the bonds market. The yield on the 10-year benchmark edged one basis point higher to 5.2831 percent. -------------------------------------------------------------

MARKET SNAPSHOT

Friday's close Thursday's close

Bombay Sensitive Index (pts) 6,011.66 5,936.96

Indian rupee (/$) 45.2325/2375 45.2500/2550

7.37 percent 2014 bond (%) 5.2831 5.2776

Call money (%) 4.25/4.50 4.25/4.40

6-mth fwd annualised premium (%) 0.37 0.43 -------------------------------------------------------------