Indian shares rose nearly 2 per cent on Thursday to post their third session of gains, as Larsen & Toubro surged after upbeat March-quarter results, raising hopes about the domestic economy.

The stock of engineering major L&T rose over 14 per cent after the company put up a strong show in the March quarter.

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Domestic sentiment was buoyed as oil advanced to $50 a barrel for the first time this year as US industry data showed a decline in stockpile. The G7 summit in Japan to take stock of the global economy also infused a sense of confidence.

Short-covering by participants with today being the last trading session of May series of derivative contracts supported the upmove.

The 30-share BSE index Sensex ended higher by 485.51 points or 1.88 per cent at 26,366.68 and the 50-shre NSE index Nifty ended up 134.75 points or 1.7 per cent at 8,069.65.

All BSE sectoral indices ended in the green. Among them, capital goods index surged the most by 8.78 per cent, banking 2.22 per cent, infrastructure 2.02 per cent and realty 1.82 per cent.

Capital goods index surged as the Modi government approved the country’s first ‘National Capital Goods Policy’, which seeks to treble the production of capital goods in 10 years to ₹7,50,000 crore and raise employment in the sector almost four times to 30 million.

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Major Sensex gainers were L&T (+14.04%), State Bank of India (+4.91%), BHEL (+4.73%), Axis Bank (+3.35%) and ONGC (+3.09%), while the top five losers were Sun Pharma (-0.87%), NTPC (-0.67%), Cipla (-0.57%), GAIL (-0.31%) and Reliance (-0.27%).

Bajaj Auto rose as much as 1.7 per cent after the two-wheeler maker on Wednesday reported a 29 per cent rise in its March-quarter net profit.

However, Aditya Birla Fashion and Retail , famous for its brands such as Van Heusen and Pantaloons, fell as much as 6.8 per cent to its lowest since March 30, after March-quarter loss widened to Rs 110 crore.

Monsoon forecast

Improving earnings have raised optimism at a time when investors are betting monsoon rains will be stronger than average, boosting the outlook for rural demand.

Private weather forecaster Skymet had said on Tuesday that monsoon rains are expected to be 109 per cent above the long-term average, compared with its earlier estimate of 105 per cent.

“Monsoon is one major positive sentiment driver and global markets are also looking calm,” said Rikesh Parikh, vice-president of equities at Motilal Oswal Securities.

“Also, the results season is on the verge of getting over and so far we have not seen any negative surprises. In fact, earnings are a tad better than market estimates and this comes after some four-five quarters of dull performances.”

Mirroring the optimism, foreign investors have bought Indian shares worth a net $44.18 million so far this month, taking this year's inflows to $1.84 billion.

Analysts, however, warned that the markets could turn volatile later in the day ahead of the expiry of May derivative contracts.

Global markets

European shares were mixed on Thursday, with banks in Italy and Spain on the back foot following a recent rally, while commodity stocks were boosted as Brent crude oil prices hit $50 a barrel for the first time since November.

The STOXX Europe 600 was down 0.1 per cent at 348.06, with the FTSEurofirst 300 flat. Both indexes hit a 4-week high in the previous session.

Brent crude oil rose above $50 a barrel for the first time in nearly seven months on Thursday but Asian shares struggled to gain traction, with worries about US interest rates and China's slowing economy keeping investors on the sidelines.

While energy stocks outperformed, a slump in mainland China stocks to 2-1/2 month lows dampened any broader interest in riskier assets in Asia, offsetting overnight gains on Wall Street.

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