Sensex scales record high; Nifty within kissing distance

Unperturbed by end of US Fed's bond buying, equities post healthy gains

 

Taking the end of bond-buying by the US Federal Reserve in its stride, the Indian market on Thursday scaled new all-time highs, buoyed by the reforms process started by the government.

Realty shares led the gains after rules were eased for foreign investments in the construction sector on Wednesday, after market closure. Software exporters also rose on the US Fed’s move, which investors judged as a signal for a strong American economy, a key market.

The BSE Sensex gained 248 points or 0.9 per cent to end at 27,346.33, above its previous record close of 27,319.85 on September 8. The 50-share National Stock Exchange Nifty gained 78.75 points, or almost one per cent to 8,169.2, only four points shy of its previous record close. On an intra-day basis, the Nifty gained more than one per cent to 8,181.55, surpassing its previous high.

The growing buzz that the Reserve Bank of India (RBI) will ease interest rates in December as inflation is heading south, led by a drop in crude oil prices, further boosted sentiment.

“India has received an unexpected boost from the recent collapse in global crude oil prices, which will benefit its macro economic position meaningfully through a lower current account deficit, fiscal deficit and inflation,” said Sanjeev Prasad, senior executive director & co-head, Kotak Institutional Equities, in a note. “The improving macro economic parameters and gathering reforms momentum will allow RBI adequate room to adopt a softer monetary stance.”

In October, the government took a series of steps, including decontrol of diesel prices and opening of the coal sector, to take the economy to a higher growth trajectory.

Manish Sonthalia, head of equity at Motilal Oswal AMC, said: “Fundamentally, there is a belief that interest rates…are set to fall in some time.”

The BSE Bankex, an index for the performance of banking shares, advanced 0.7 per cent on Thursday, led by gains in private sector lenders YES Bank and IndusInd Bank. In realty, the shares of Unitech, HDIL and DLF jumped a little more than five per cent each on the government’s move to relax foreign investment norms in the construction sector.

Shares of information technology firms also gained as noted earlier. Tata Consultancy Services and Infosys gained around two per cent each. “QE (the US Fed's bond buying) has worked. The US economy is now well into expansion mode and looking a lot stronger than Europe and Japan, that have both taken longer to adopt it. And, the dire consequences that some saw flowing from QE – hyperinflation, a collapse in the dollar, massive asset bubbles – have not eventuated,” said Shane Oliver, head of investment strategy and chief economist, AMP Capital.

Foreign institutional investors purchased shares worth nearly Rs 1,260 crore on Thursday, provisional data showed.

The BSE Sensex has gained nearly 30 per cent so far in 2014 and is one of the best-performing stock markets in the world.