Domestic markets crossed yet another milestone on Wednesday with the benchmark BSE Sensex settling above the 28,000 level for the first time and the NSE Nifty crossing the 8,400 level on rate cut expectations in the wake of the sustained fall in inflation and crude oil prices.
The Sensex has increased 32 per cent this year, the best performer among the world’s 30 biggest markets, and is valued at 15.6 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s multiple of 11. Foreign investors brought a net $98 million on Tuesday.
But why are the markets rising? Here are some pointers:
1. Expectations that easing inflation would prompt the Reserve Bank to cut interest rates earlier than expected
2. Brent crude falls below $81 per barrel, its four-year low, on oil glut worries
3. Expectations that the government will initiate more economic reforms
4. Sustained foreign investment inflows