India's stock markets rang in the New Year in style on Tuesday, with the benchmark Sensex hitting a 20-month high and key indices staring into crucial thresholds that could be achieved in the very first month of the year.
The main trigger was optimism in the US where lawmakers moved close to settling a "fiscal cliff" problem that threatened a second recession in the world's powerhouse economy that affects growth all around.
The 30-share Sensex of the Bombay Stock Exchange is now eyeing the 20,000-mark while the National Stock Exchange's 50-share Nifty is not far from the 6,000-mark.
The Sensex surged by 152 points or 0.79% to close the first day of 2013 at 18,580.81, while the Nifty was up 45.75 points or 0.77% at 5,950.85 points.
Expectations of a more benign inflation that could lead to lower interest rates in the new year aided the positive sentiment.
"We expect some positive moves by the government that could lead to a faster fall in interest rates. This could attract more foreign funds into India and as of now, we expect the Sensex to go up to about 20,500 levels in 2013," said Dipen Shah, head, private client group research at Kotak Securities.
Indices representing shares of real estate, metal, bank and capital goods companies on Tuesday saw the highest increases.
Sustained inflows from foreign funds into the equity market also boosted the mood. Foreign institutional investors (FIIs) bought shares worth an estimated Rs. 826.34 crore on December 31 after deducting sales. In December FIIs were net buyers with purchases worth Rs. 24,183 crore.
This was the highest net monthly investment by FIIs in stocks since February 2012 when they had infused Rs. 25,212 crore.
"The possible resolution of the US 'fiscal cliff' issue kept sentiments positive. The markets overlooked the worse-than-expected domestic data on current account deficit, core sector growth and fiscal deficit," said Shah.