Indian shares edge higher on hopes Indo-Pak tensions may not escalate
By Krishna V Kurup
Feb 28 () - Indian shares crept higher on Thursday amid expectations the tensions between nuclear-armed India and Pakistan won't escalate further, while investors awaited a key economic data due later in the day.
The United States, China and other world powers have urged restraint from the neighbours following retaliatory air strikes in the wake of a suicide car bombing that killed at least 40 Indian paramilitary police in Indian-controlled Kashmir on Feb. 14.
The armed conflict between the two bitter rivals comes at a critical juncture for Indian Prime Minster Narendra Modi, who faces a general election in a few months.
"Markets are discounting the situation on the border, as neither country seems to be in a position to escalate," said Sunil Sharma, chief investment officer, Sanctum Wealth Management. "Also, this (the conflict) has likely provided clarity on the election outcome, raising the odds of a victory for the incumbent regime, or at the very least, a stronger positioning heading into May elections."
Yet, there will be some volatility during the session due to the F&O expiry, Sharma added.
"The upshot is that despite the escalation, the most likely outcome is that some compromise is found that allows both sides to back down," said Gareth Leather, Senior Asia Economist at Capital Economics, in a note.
Investors also awaited India's gross domestic product data due later in the day.
A poll showed that India's economy likely grew at its slowest pace in over a year in the October-December quarter, as weaker rural incomes and softer urban demand weighed on consumption.
If the forecast proves accurate, it may make it harder for Prime Minister Narendra Modi's BJP to persuade voters that government policies were delivering economic success.
Energy and financial stocks led the gains on the NSE index, with Reliance Industries Ltd rising up to 1.3 percent, and HDFC Bank Ltd adding as much as 0.7 percent.
The NSE index is on track to end the month largely flat, while the BSE index is likely to finish 0.7 percent weaker.
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