The benchmark Sensex fell back after scaling a lifetime high on the last day of the Hindu Samvat year 2069 and still ended at a fresh closing record on Friday with a 32-point gain amid continued foreign fund buying and renewed optimism about the economy.
The index climbed to an all-time high of 21293.88 in intra-day trade. It ended at 21196.81, a gain of 32.29 points.
Bank and auto stocks were at the forefront, with State Bank of India, Mahindra & Mahindra, ICICI Bank and Tata Motors taking the Sensex higher. Realty and metal sectors advanced.
The markets gained for the fourth day in a row after the Reserve Bank of India on Tuesday increased the repo rate to curb inflation and also improved liquidity for banks.
The U.S. Federal Reserve’s decision this week to continue with its bond-buying stimulus programme eased concerns about foreign funds pulling out capital from emerging markets.
Overseas investors were net buyers for the 20th straight day, purchasing Rs. 1,875.87 crore worth of shares on Thursday, according to provisional data from the stock exchanges.
“All one can say is liquidity is driving the markets. And what is creating the liquidity surge? It is the expectation over the elections results, no tapering in the Fed’s bond-buying programme and finally, the expectation that interest rates may have peaked,” said Milan Bavishi, Head of Research at Inventure Growth and Securities.
The Sensex has gained 626.53 points, or 3.05 per cent, in the past four sessions. The 50-share CNX Nifty on the National Stock Exchange moved up 8.05 points to 6307.20. The SX40 on the MCX Stock Exchange ended at 12,585.49, up 40.36 points.
Finance Minister P Chidambaram said on Friday that the current account deficit is under control and the fiscal deficit target will be met. He said export growth is expected to continue and a bumper harvest is likely after the good monsoon.
The Minister acknowledged that the market seemed happy but he cautioned investors against excessive exuberance.
While increased capital inflows driven by attractive corporate earnings boosted buying, some investors chose to book profits after the recent gains, brokers said. Auto shares saw buying on robust sales growth in October, experts said. An index of eight infrastructure industries grew 8 per cent in September, the government said on Thursday. “The current rally has been fuelled by excess liquidity sloshing around in developed markets,” GELP Capital said in a note. “However, the pinch still remains that retail investors have not participated in this rally. Whether they will or should enter into the market at these stratospheric levels seems debatable.”
Asian stock markets ended mixed. Key indices in China, Hong Kong and South Korea ended higher while they fell in Japan, Singapore and Taiwan. European markets were lower ahead of manufacturing data from the U.K. and the U.S.
The BSE and the National Stock Exchange will open on Sunday, November 3, for Muhurat trading from 18.15 hours to 19.30 hours.
Both exchanges will be closed on Monday, November 4, for Diwali- Balipratipada.
Rupee drops 24 paise
The rupee on Friday dropped further by 24 paise to close at a more-than two-week low of 61.74 against the dollar following sustained demand from importers for the strengthening U.S. currency, in stark contrast to stocks.
The demand from importers, mainly oil refiners, was so strong that heavy capital inflows amid record local stocks failed to stem the rupee’s fall, a forex dealer said.
At the interbank foreign exchange market, the rupee opened sharply lower at 61.95 a dollar against its previous close of 61.50 and touched the day’s low of 61.96.
It recovered on late dollar selling by exporters to a high of 61.70 before settling at 61.74, a fall of 24 paise.
The rupee is at the lowest level since closing at 61.83 on October 15.
It is the third weekly drop for the rupee, which touched an all-time low of 68.85 on August 28.
“The rupee depreciated on Friday as the dollar index traded positively throughout the day and is heading for a weekly gain after a two-week fall,” said Pramit Brahmbhatt, CEO of Alpari Financial Services (India).