Sensex inches towards 19,000 on reform push

Bulls are having a field day on Dalal Street, which houses the Bombay Stock Exchange (BSE) building, as the Sensex is fast approaching the 19,000 mark.

On Friday, the 30-stock index of Asia’s oldest stock exchange gained nearly one per cent or 183.24 points, to close at 18,762.74, on expectations that the government will continue its reforms momentum and after a tough Spanish budget buoyed Asian markets. The government’s assurance to stick to its borrowing plan for the second half of this year also helped the sentiment.

The Sensex touched a high of 18,869.94 during the day’s trade before paring some of the gains. All the sectoral indices on the BSE, except realty, ended in the green, indicating overall strength in the market.

At the National Stock Exchange (NSE), the 50-stock Nifty index added 53.80 points, or 0.95 per cent, to close at 5,703.30, its highest close since July 7, 2011. This month’s 7.6 per cent rise is the biggest monthly gain for the Sensex this year since January, when the index had jumped 11 per cent.

Foreign institutional investors (FIIs) bought shares worth Rs 19,261.50 crore ($3.5 billion) this month as the government took bold steps like raising diesel prices and opening retail and aviation sectors for foreign firms.

Strategists at brokerages like Morgan Stanley, Citi, Deutsche Bank and Ambit have increased their Sensex targets this month enthused by government action. Australia’s Macquarie is the latest to join the bandwagon.

Its India strategists on Friday lifted their Nifty target to 6,600, based on 15 times estimated earnings for FY14.

“Recent initiatives by the government have made it possible for GDP growth to return to around seven per cent levels and this optimism has driven our uptick in target multiple from 13.8 times to 15 times (for the Nifty),” said Macquarie’s Rakesh Arora and Arjun Bhattacharya in a note to clients.

Power sector reforms, interest rate cuts and infrastructure spending are the key themes to play, according to Macquarie.
 

ON A HIGH
	28-Sep-12	% Chg*
Sensex	18,762.74	0.99
Nifty	5,703.30	0.95
TOP 5 SECTORAL NDICES
Auto	10,413.19	1.89
Cons. Durables	6,939.84	1.63
FMCG	5,507.36	1.42
Metal	10,528.23	1.38
Power	2,048.83	1.37
TOP 5 SENSEX GAINERS      (Price in Rs)
Hindalco	120.5	3.39
Tata Motors	267.45	2.96
Cipla	380.6	2.5
Sun Pharma	693.3	2.44
Tata Power	106.95	2.3
* Change over previous close Compiled by BS Research Bureau

Next week, investors will keenly await the outcome of the final report by a panel headed by Parthasarathi Shome, reviewing a controversial set of taxes for foreign investors. In its draft report early this month, the panel had suggested delaying implementation of General Anti-Avoidance Rules (GAAR) by three years and also removing the short-term capital gains tax.

However, experts say, investors still need to watch out for developments in the Euro zone.

“Euro zone will continue to grab headlines amid concern about the precarious fiscal health of some of its members,” said Amar Ambani, head of research at IIFL.