Indian shares advanced for the fourth session in the last five, tracking global markets and sending the Sensex past the psychological market of 26,000 points. Pre-Budget euphoria sparked by finance minister Arun Jaitley’s hawkish statement, which raised hopes of a growth-oriented Budget, further strengthened investor sentiment.
The Sensex rose 0.5% or 138 points to end at 26,100.08 on Monday while the Nifty advanced 0.46% or 35.55 points to 7,787.15, after posting a 3.5% gain last week.
India is the world’s best performing market in 2014, having left the Dow Jones (2.29%) behind by a significant margin. The Sensex is up 26.9% in dollar terms, beating not just China’s Shanghai Composite (-5.10%) but also the Taiwan Taiex (9.96%) and South Korea’s Kospi (4.64%).
Indonesia’s Jakarta Composite (17.30%) is the only Asian market to have recorded a performance anywhere close to that of India. Last week, the benchmark indices marked the highest first-half-yearly gain of 20% since 2009, and further strengthened market performance vis-a-vis global peers.
Foreign institutional investors (FIIs) continued
to buy into stocks on Monday — overseas funds have pumped about $10.5 billion into Indian equities so
far in 2014.
India has attracted the second highest flows among Asian and emerging markets tracked by Bloomberg. Except for January, FIIs have been net buyers every month this year, with the biggest purchases in March of $3.7 billion.
US equities surged to a record high last week after economic data showed an improvement in the job market, once again raising demand for Indian software companies. Analysts said foreign investors are bullish on India and if the Union Budget hints at better growth as well as controlled inflation, more money could pour into Indian markets.
Japanese diversified financial services firm Nomura expects a “good Budget” from the new government.
“We expect the government to commit to medium-term fiscal consolidation with a deficit target of 3% of GDP by FY17. Additionally, we expect the budget to encourage infrastructure investment, announce measures to attract capital inflows such as FDI liberalisation, clarify on retrospective taxation, and raise the asset sales target owing to new Sebi norms. Hence, we expect the budget to contain a mix of statement of intent (talk) and actual announcements (walk),” Nomura economists Sonal Varma and Aman Mohunta wrote in a research note.
Nomura further stated that long-term valuations appear attractive, with the Sensex trading at 15.5 times forward