Sensex jumps to record high on strong foreign buying

MUMBAI (Reuters) - The BSE Sensex rose as much as 1 percent to a record high on Thursday, extending a recent rally as continued buying by foreign investors boosted blue chips such as ICICI Bank.

The Sensex hit a record high of 21,492.49, surpassing its previous historic high of 21,483.74 points posted in December last year, while Nifty was just half a percentage away from its all-time high.

The strong rally has defied expectations that foreign investors would grow more cautious as the Federal Reserve continues to withdraw its monetary stimulus and ahead of general elections set to kick off on April 7.

Instead, overseas investors have bought heavily into India as a sharply narrowing current account deficit and a more stable rupee have increased confidence in a country that only last year was in the midst of its biggest market turmoil since the balance of payments crisis of 1991.

"The rally has more legs to go. Positivity around elections, improving macro, it's all falling in place" said Deven Choksey, managing director at K R Choksey Securities.

The BSE index was up 0.8 percent at 0918 GMT. Nifty was up 0.9 percent, not far from its record high of 6,415.25 points hit on December 9.

The rally comes as foreign investors have been buyers of Indian shares for 14 consecutive sessions for a net total of about $900 million.

India is the only share market after Indonesia to turn positive for the year among the "Fragile Five" economies, or those countries whose large current account deficits were seen as making them particularly vulnerable to foreign outflows.

In India, the current account deficit has narrowed sharply, to 0.9 percent of gross domestic product in the October-December quarter, according to data on Wednesday, improving sharply from the record high of 4.8 percent of GDP in the year ended in March 2013.

The improving current account deficit, and the strong foreign inflows, have also boosted the rupee, which is up 12.2 percent since hitting a record low in late August.

Blue chips have been the main drivers of the rally. On Thursday, ICICI Bank gained 3.1 percent while and Reliance Industries rose 1.7 percent.

(Reporting by Abhishek Vishnoi; Editing by Rafael Nam)