Climax to Greek tragedy gives markets a high

Sensex nears 18,000 at six-month peak as Greek austerity deal struck hours before euro zone meeting on $172-billion rescue

Key stock market indices, the Sensex and the Nifty, rose to six-month highs on Thursday, supported by European markets after reports that Greece’s leaders were nearing an agreement on further spending cuts needed to receive a rescue package.

The Bombay Stock Exchange (BSE) benchmark, the Sensex, rose 0.70 per cent, or 123.43 points, to 17,830.75, its highest close since August 3, 2011. The 30-stock index erased an intra-day loss of 0.6 per cent, helped by a strong showing by major European markets.

At the National Stock Exchange (NSE), the Nifty index closed above the 5,400-mark, considered an important technical resistance by many analysts, for the first time since August 3, 2011. The 50-stock index gained 0.8 per cent to 5,412.35.

After the close of the Indian markets, Bloomberg news agency reported that Greek political leaders had struck a deal on austerity measures, clearing the way for a swap to cut the nation’s debt and win its second rescue in two years. The accord came less than four hours before euro-region finance ministers were to hold an emergency meeting in Brussels to discuss a euro 130 billion ($172-billion) lifeline to Greece and a debt swap that would impose a loss of nearly 70 per cent on investors.

Foreign institutional investors bought Indian shares worth Rs 1,200 crore on Thursday, provisional data on the BSE website showed. With this, they have invested close to $4 billion (roughly Rs 19,600 crore) in Indian shares this year so far, according to Securities and Exchange Board of India (Sebi) data. Domestic institutional investors were sellers to the tune of Rs 1,037.6 crore, according to provisional data.

“The monetary easing cycle ahead and the overhang of state elections getting over in March, should support an economic recovery and thus the Indian markets in our view,” said Suresh Mahadevan, managing director and head of equities, UBS Securities (India), in a strategy note to clients.

Strategists at Citigroup expect the current rally in emerging markets like India to continue. “The current conditions of ample liquidity, against a background of attractive emerging-market valuations, should remain for some time. We would be buyers of any pullback,” said Geoffrey Dennis, equity strategist at Citigroup, in an emerging-market strategy note.

Denis believes the outperformance of Bric (Brazil, Russia, India and China) countries would be a key theme of 2012 due to attractive valuations and continued inflows into emerging-market equity funds.

Analysts see the Nifty gaining further after the 5,400 level. “The Nifty has managed to close above 5,400, a crucial resistance. The momentum continues to remain positive on the back of strong foreign flows coming into the market,” said Yogesh Radke, head of quantitative research at Edelweiss Securities.

The market breadth was positive on the BSE, with nearly two stocks advancing for every declining stock. Among the major gainers on the Sensex, Sterlite rose 4.6 per cent to Rs 129.90 and Jindal Steel added 3.8 per cent to Rs 603.15. Metal, realty, banking and auto indices gained 1.5-two per cent on the BSE.

Earlier, most Asian markets closed flat due to uncertainty around Greek bailout talks. Japan’s Nikkei 225 declined 0.15 per cent to close at 9,002.24, China’s Shanghai Composite gained 0.09 per cent to 2,349.59, Hong Kong’s Hang Seng closed marginally lower at 21,010 and Taiwan’s Taiex Index gained 0.52 per cent to 7,910.78.