The BSE Sensex scaled a new peak for the second successive day on Friday, rising to 21,960.89 points, before closing at a record 21,919.79 points, up 405.92 points or 1.89%.
It has gained 973 points over the last four trading sessions. The Nifty gained 125.50 points or 1.96% to 6,526.65 points, also a new record.
“The possibility of a Narendra Modi-led NDA government coming to power after the Lok Sabha elections is fuelling the rally,” said Vinay Khattar, research head, Edelweiss Financial Services, a leading financial services company. Such a government is expected to be more business-friendly than the UPA administration.
Macro-economic factors like India’s now comfortable current account deficit (the gap between dollar inflows and dollar outflows), following stringent curbs on gold imports, rising exports and falling imports and a perception that the Indian economy may be slowly returning to a higher growth trajectory also buoyed sentiment.
Foreign institutional investors, who have pumped in about $1 billion (Rs 6,250 crore) into the market over the past fortnight, are leading the buying frenzy, belying expectations that they would turn cautious and watch from the sidelines as the polls drew nearer.
But unlike a few months ago, when they were betting on export-oriented companies, this time, they are investing in firms focused on the domestic market.
“Corporate earnings are as important as the upcoming elections,” said Raamdeo Agrawal, joint MD, Motilal Oswal Financial Services, a leading investment bank. “Throughout the recent slowdown, there has not been a single year of a decline in overall earnings.”
India’s largest private sector company Reliance Industries zoomed 5.72% while India’s largest telco Bharti Airtel also soared 5.5%. India’s largest private bank ICICI Bank gained 6% and SBI rose 4.6%.
The Sensex has risen before every election since 1991. Analysts expect the current rally to sustain till the polls.
Finance Minister P Chidambaram on Friday said the fiscal and current account deficits are under control and the economy is more stable than it was 18 months ago.
"Euphoria continues on Dalal Street. It was broadly on the hope the pre-election rally fuelled by foreign funds, along with an increased participation from retail investors will drive markets higher in near-term," said Jayant Manglik, President-retail distribution, Religare Securities.
Surging Indian equities received another push on firming Asian trend and higher opening in Europe as investors awaited the US jobs data later on Friday. Foreign Institutional Investors were net buyers of Indian shares in fifteen straight sessions.
Sectorally, the interest-sensitive BSE Realty sector index gained the most by rising 5.40%, followed by Banking index (up 5.35%), Capital Goods index (4.05%) and Oil & Gas index (3.65%).
(With PTI inputs)
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