Sensex hits new record on BJP win; rupee at 4-month high
By Hemant Verma On Sunday, December 8, 2013
Business,
Market,
Sensex,
Technology
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The BSE Sensex surged as much as 487 points to a record high of
21,483.74, while the 50-share Nifty benchmark edged past the key 6,400
levels on Monday as investors cheered a four-zero victory for the
Bharatiya Janata Party in the state polls.
The BJP is perceived by many investors as being more business-friendly,
and it's good showing in assembly elections raised optimism about its
chances ahead of general elections due by May next year.
"The BJP is considered more right-of-center, pro-business and reform-oriented," Nomura said in a note to clients.
"The fact that runaway spending by the ruling party has not won any
votes could be taken as a very positive signal by the markets in terms
of voter preference for the kind of policy favoured by the electorate."
The Sensex bettered its previous record high of 21,321.53 hit on
November 3, 2013, while the Nifty surged past its previous all-time high
of 6,357 hit in January, 2008. The rupee hit nearly 4-month high of
60.84 against Friday's close of 61.41.
The BJP cruised to landslide wins in Madhya Pradesh and Rajasthan, won a
majority in Chhattisgarh and emerged as the single largest party in
Delhi.
Market analyst Sarvendra Srivastava told NDTV that a game changing
session is on the cards and a breakout has happened in the expected
direction.
Madhav Dhar, managing partner of GTI Capital told NDTV that this
verdict is more of a vote against the ruling Congress Party. The results
are an affirmation that we had unsustainable policies and a lot of
cynics about India will pause and say wow things will change, he said.
"The economy will be on a 7 per cent growth trajectory, inflation will
be below 7 per cent and corporate profits will rise. Markets will be
substantially higher that what it is today," Mr Dhar added.
However, foreign brokerages were a little subdued in their outlook.
Macquarie said the positives from state elections are somewhat factored
in the markets.
Analysts also warned that a BJP victory next year is far from
guaranteed and the market rally could be capped by worries about an
economy expected to grow below even the decade low of 5 per cent hit in
the previous fiscal year.
The Federal Reserve could also move soon to end its massive stimulus
after signs of an improving US economy. Only a few months ago India was
badly roiled by fears of an early end to the Fed tapering, ushering the
worst market crisis since the balance of payments turmoil two decades
ago.
Although India is seen as being in a stronger position after its
current account deficit has narrowed to a more than four-year low, the
prospect of foreign selling is a concern.
Foreign investors have bought Rs. 1 trillion so far this year in shares, making these capital flows vital for India's current account balance.
Furthermore, high inflation has forced the Reserve Bank of India to
raise interest rates by half a percentage point over the previous two
months. A continued spike in consumer prices in data due out on Friday
could bolster views the central bank will again tighten monetary policy
again this month.
"There should not be such excitement around new high. It is not
understandable in context of growth and valuations." Sanjeev Prasad,
executive director and co-head of Kotak Institutional Equities in
Singapore.
As of 12.45 p.m., the Sensex traded up 315 points at 21,312, while the Nifty traded 97 points higher at 6,357.
On the Nifty, 41 of the 50 shares traded in the green, but banking and
industrial stocks were the biggest gainers. The Bank Nifty rose as much
as 4.3 per cent. ICICI Bank was among the top Nifty gainers, up 4.8 per
cent. Engineering and construction major L&T traded with 4.65 per
cent gains.
About Hemant Verma
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