After a declining trend in 2011, the benchmark Sensex of the Bombay Stock Exchange recorded its strongest bounce-back in the last 12 months with a gain of 11% or 1,740 points, in January 2012. Strong FII investment led the rally.
The Sensex recorded its second-highest gain in March 2011 when it jumped 1,422 points.
“The rally was a result of strong inflow of foreign investors’ money and cheap valuations of stocks,” said Sudip Bandyopadhyay, managing director, Destimoney Securities.
Overseas investors poured in over Rs 26,000 crore in the Indian markets in January 2012, the highest one-month net inflow in 16 months, as sentiments received a boost from easing inflation concerns and attractive valuations. Foreign institutional investors (FIIs) had mostly stayed away from Indian equities in 2011 but invested Rs 10,358 crore in stocks in the first month of 2012.
“Though there are challenges before the Indian economy such as inflation and rising fiscal deficit, we do not expect any sharp correction in the Indian market going forward,” said Deven Choksey, MD, KR Choksey Securities.