The Sensex has now risen 13.2% since Raghuram Rajan took over as the governor of Indias central bank on September 4, and is up 8.2% in the year to date. The rupee, meanwhile, has appreciated 9.6% against the greenback since the governor announced measures to shore up the currency. The rupee closed at 61.24 on Wednesday.
The surge in global indices boosted sentiment in the Indian markets on Wednesday. The Dow Jones had touched its all-time high of 15,680.35 points on Tuesday on expectations that the US Fed would continue with the stimulus. Globally, things are much better now than they were a few months back and the Fed tapering seems to be off the table, which is good for emerging markets such as India, Andrew Holland, CEO, Ambit Investment Advisors, said.
Foreign institutional investors (FIIs) bought a net $166 million of Indian equities on Wednesday, according to provisional data from stock exchanges, taking their month-to-date tally to about $2.6 billion. This was the 19th consecutive session of FII buying. FIIs have now purchased shares worth about $16.2 billion so far this year.
The Nifty added 30.8 points to close at 6,251 on Wednesday. The Sensex is now just 172 points away from the intra-day peak of 21,206.77 that it had scaled on January 10, 2008, and has gained 21% since hitting an intra-day yearly low of 17,448.71 on August 28.
On Tuesday, the Sensex had put on 1.7% or 358 points with the Reserve Bank of India tweaking policy along expected lines and injecting liquidity to the tune of R20,000 crore into the system. Although the RBI governors tone seemed hawkish, he did a good job of injecting liquidity into the system and his statement saying that growth was a concern was viewed positively by the market, said Holland.
The renewed buying augurs well for India, which is dependent on overseas inflows. Foreign brokerages had recently warned that any significant sell-off by overseas investors could bring the markets crashing down as FII ownership in Indian markets was at an eight-year high.
The market has been driven by the stabilisation in the currency and flows from global investors. The results season has been good so far, which is another positive. Of course, there would be challenges for certain sectors, but earnings downgrades by and large seems to have bottomed out, said Navneet Munot, CIO at SBI MF.
A good monsoon is also expected to result in improved rural consumption and better agricultural growth in the coming months, Munot added.
Despite the recent upmove, India is among the worst performers in Asia in the year to date. The BSE Sensex has shed 3.1% in dollar terms in the current calendar year, while the 50-share Nifty is down 5.2%. In contrast, most of its Asian peers Hong Kongs Hang Seng (up 2.8%), South Koreas Kospi (3.5%) and Taiwans Taiex (8.7%) have fared much better. Japans Nikkei 225 (up 23.17%) has emerged the top performer. Chinas benchmark index Shanghai Composite is also going through a bit of a rough phase and is down 2.6% ytd. The only market India has beaten is Indonesias Jakarta Composite, which is down 8.6% ytd in dollar terms.
Most Asian markets rose on Wednesday. The Hang Seng rose the most at 2%, while Nikkei 225 (1.23%) and the Shanghai Composite (1.48%) also logged handsome gains. European stocks rose to their highest level in more than five years on speculation that the Fed would delay the reduction of its bond buying programme. Major European indices opened strong ahead of the Fed meeting, with the FTSE 100, DAX and the CAC, trading up anywhere between 0.38% and 0.54% at about 5.00 pm IST.
Back home, 17 of the 30 Sensex stocks ended in the green on Wednesday. The wider market breadth was moderately strong with 48% or 1270 of the total stocks gaining. Most of the 13 sectoral indices on the BSE gained, with the BSE Healthcare and BSE FMCG gaining more than 1% each. Among individual stocks, Bharti Airtel (5.23%), Dr Reddys Laboratories (3.87%), Hindalco (2.77%), ICICI Bank (2.23%), BHEL (2.09%) were among the top gainers.
India VIX, a volatility index based on the CNX Nifty index option prices, slid 1.7% on Wednesday to 19.53.