Indian shares rose for a second session on Thursday, closing at their highest level in two weeks, led by a rise in pharmaceutical stocks after positive comments from broker CLSA boosted investor sentiment.

Gains were however limited amid profit-taking in other blue-chip stocks and lower global shares after strong US data and comments from a Federal Reserve governor fanned expectations of an interest rate hike in September.

The 30-share BSE index Sensex was up 75.05 points or 0.27 per cent at 28,298.13 and the 50-share NSE index Nifty was up 20.7 points or 0.24 per cent at 8,588.65.

Dr. Reddy's Laboratories gained as much as 3.2 per cent to mark a record high of Rs 4,326.50. CLSA said the company's profit could increase to $1 billion by FY20 as it launches new products. The scrip ended higher by 1.79 per cent at Rs 4,270.10 on the BSE.

Cadila Healthcare rose 2 per cent after CLSA upgraded the stock to "outperform" from "underperform," citing differentiated drug pipeline. But it ended down by 0.15 per cent at Rs 1,915.70.

Lupin rose 1.37 per cent to Rs 1,703.15 and Aurobindo Pharma gained 3.14 per cent to 787.70 on rising prospects of their US businesses.

Among BSE sectoral indices, consumer durables index was the star-performer and was up 1.91 per cent, followed by capital goods 1.68 per cent, healthcare 1.14 per cent and auto 0.56 per cent. On the other hand, FMCG index fell the most 1.13 per cent, followed by metal 0.55 per cent, oil & gas 0.26 per cent and power 0.16 per cent.

Top five Sensex gainers were L&T (+2.74%), Dr Reddy's (+1.79%), Tata Motors (+1.63%), Lupin (+1.37%) and TCS (+1.28%), while the major losers were ITC (-1.7%), Coal India (-1.59%), Reliance (-0.84%), VEDL (-0.78%) and Wipro (-0.63%).

CLSA said drugmakers' transition to making complex generics should drive significant growth in the sector. Drugs worth $100 billion, especially biologics, are losing patent protection over the next five years in the United States, the broker added.

Sentiment was also boosted after Labour Minister Bandaru Dattatreya said state pension fund could invest more into equities in the next fiscal year starting April by raising the current limit set at 5 per cent of total investable assets.

India's state provident fund chief said overall investment in equities could be as high as Rs 7,000-8,000 crore this year after including other long-term assets.

"Sentiment remains positive as India's macro remains in a sweet spot. Fed rate hike and monsoon are the key triggers to watch going forward," said G. Chokkalingam, founder of Equinomics, a Mumbai-based research and fund advisory firm said.

A report by SMC Investments and Advisors said: "Asian shares mostly rose while the dollar held firm after strong service sector data and comments from a Fed policymaker boosted optimism about the United State economy and fanned expectations of a US rate hike in September. Overnight, Wall Street shares mostly edged higher, helped by data showing the July pace of growth in the US service sector surged to a decade high and by solid corporate results in Europe. US non-manufacturing index jumped to 60.3 in July from 56.0 in June, with a reading above 50 indicating growth in the service sector. Economists had expected the index inch up to 56.2."

European shares retreated on Thursday, with some weak corporate results hitting the shares of enzyme company Novozymes and Deutsche Post.

The pan-European FTSEurofirst 300 index, which rose 1.3 per cent in the previous session, fell back 0.4 per cent. The euro zone’s blue-chip Euro STOXX 50 index declined by 0.2 per cent.

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