The 30-share benchmark Sensex closed above the 30,000-mark for the first time in history on positive global cues coupled with strong corporate earnings as continued foreign inflows helped the rupee to strengthen to a 20-month high against the dollar.
The benchmark equity index closed at 30,133.35, up 190.11 points or 0.63% higher than its previous close, with ITC, M&M, HDFC being some of the major gainers.
among the 18 stocks that ended in green on Wednesday.
Foreign institutional investors have pumped in more than $3.4 billion in equities in April. The previous all time high for the Sensex was on Tuesday when it closed at 29,943.24.
Corporate sector
The present rally which started around December-end last year was broad-based with small and midcap index outperforming the benchmark index. The recent rally in the equity market was also due to strong earnings by the corporate sector, including IDFC Bank which announced sharp reduction in bad loans on Tuesday.
There is a hope for inflows sustaining on the back of improvement of both domestic and global economy.
“While we do think that markets would continue to trend upwards over the long-term, there could be some aberrations due to global events,” said Prasanth Prabhakaran, Senior President & CEO, YES Securities. “But as seen earlier too, our markets are quick to recover during such times as the domestic growth story remains intact.”
The Nifty also inched higher for the third day in a row and gained nearly 0.5% amid volatility.
“Volatility will remain high due to the derivatives expiry tomorrow,” said Jayant Manglik, President, Retail Distribution, Religare Securities.
The rupee also continued its climb against the dollar which has now appreciated close to 6% in 2017 helped by $16 billion FII inflows in both debt and equity during the period. The rupee appreciated to 63.93 intra-day, before closing the day at 64.11 per dollar — a level last seen in August 2015.
Best performing
The Indian currency has been the best performing currency in Asia after South Korean Won and Taiwan dollar.
The rupee’s appreciation in the recent months also comes amid a cautious approach by the central bank in intervening in the currency market due to inflation concerns.
“RBI has been intervening in the currency market but the amount is much lower than earlier,” said Anindya Banerjee, AVP, currency derivaties at Kotak Securities. “There are two reasons for it. One, liquidity is very high in the system and if they buy dollar by infusing rupee liquidity then that contradicts the hawkish stance. And second, I think, the government is ready to accept the fact that India needs a stronger currency.”
Commerce Minister Nirmala Sitaraman recently said currency in not the only factor to boost exports but it also depends on infrastructure and logistics, which the government is focusing on.
According to Mr. Banerjee, the combination of government’s resolve for fiscal discipline, low inflation and a hawkish monetary policy stance will continue to support the rupee in the near-term.
