In a pre-election rally, stock indices ended at an all time high on Thursday as foreign institutional investors (FIIs) ventured for stock picking.
The rupee appreciated against the dollar following current account deficit (CAD) having narrowed sharply in the third quarter of the current fiscal.
The benchmark Bombay Stock Exchange (BSE) 30-share Sensitive Index (Sensex) closed at 21513.87 with a gain of 237.01 or 1.11 per cent.
Realty stocks led the rally with a gain of 4.09 per cent, followed by power 2.45 per cent, oil & gas and metal 2.23 per cent each, capital goods 1.81 per cent, banks 1.68 per cent and consumer durables 1.50 per cent. However, health care stocks ended in the red with a marginal loss of 0.27 per cent.
Among the broader indices BSE-100 was up by 1.27 per cent and BSE 200 and BSE 500 by 1.24 per cent each. The rally was broad-based as the mid cap stocks gained 1.21 per cent and small cap stocks gained 1.22 per cent.
On the National Stock Exchange the 50-share Nifty gained by 72.50 points or 1.15 per cent to close at 6401.15.
“Today’s market move has some distinct features. The front line stocks did not move as much as realty and commodity stocks. This is largely due to the fact that FIIs have seen rupee is appreciating and they are sitting on a pile of dollars which their fund managers deployed. This has further resulted in trading funds allotting higher weights to high beta stocks which led to short covering-led buying,” said Deven Choksey, Managing Director, K.R. Choksey Share and Securities.
“This is a pre-election rally. Assuming that Nifty appreciates 10 per cent before elections and go up to 6500 plus levels, it will force traders short cover their positions. We believe the market would trade in the range of 6,200 and 6450 for now and may go up thereafter.”
Rupee surgesRegistering three consecutive days of gains, the rupee has surged to its highest level in the last three months, closing at 61.11 a dollar compared to its previous close of 61.75.
“The strength in rupee has been supported by massive reduction in country’s third quarter current account deficit (CAD), which fell below 1 percent of GDP,” said Sugandha Sachdeva, AVP, Religare Securities Limited.
The rupee has also got a cushioning from heavy inflows in to the Indian equity markets, wherein FIIs have pumped in close to $ 484.2 million in equities so far this year, as compared to $ 20 billion (net) last year.
“This led to Indian equity indices nudging higher towards the vicinity of record highs. FIIs remained positive on Indian markets on expectations of change of government in the upcoming general elections and are favouring a stable government at the Centre,” Ms. Sachdeva added.
On the global front, she said the easing of tensions between Russia and the West over Ukraine issue, has brought about a positive bias for emerging market currencies, including the domestic unit.
“Moving forward”, said Ms. Sachdeva, “rupee is expected to march towards the 61 mark in spot market and may stabilise around the same in near term.” In spite of a flurry of positive factors in the current environment, there are still growth concerns. According to her, further up-tick in domestic currency seems implausible unless the level of 61 (spot) is convincingly breached as it has been acting as a stiff hurdle restricting further appreciation of rupee since last 5 months.
