- Indian rupee vs US dollar: Don't get carried away by CAD dataBSE Sensex index hits record high, NSE Nifty not far behind as blue chips soarIndian rupee at 3-mth high, up 64 p against US dollar as CAD drops, stocks soarBSE Sensex, NSE Nifty close at life-time highs, Hindalco, ICICI Bank shares soar
Indian equities scaled new peaks on Thursday — 2,1513.87 for the Sensex and 6,401.15 for the broader Nifty — as foreign institutional investors (FIIs) shopped for the 16th straight session, comforted by a shrinking current account deficit (CAD), a strengthening currency and counting on the elections throwing up a cohesive coalition at the Centre.
Concerns about corporate earnings appear to have been brushed aside for the moment in the hope that a stable and efficient government will jumpstart growth. The shift in their mood is seen in the data — while FIIs were sellers in January and most of February, the last 16 sessions have seen them buy stocks worth $1 billion. India is beginning to see bigger inflows than its peers and in the week to February 26, saw inflows of $259 million, the third highest among key emerging and developed Asian markets. FIIs have been bullish on the bond markets for a couple of months now, having snapped up close to $5 billion of short-term paper. The inflows have helped the rupee recover smartly — on Thursday the Indian currency closed at 61.12 to the dollar, a three-month high.
At Thursday’s levels, the Indian market isn’t cheap even if it’s not overly expensive. The Sensex, which has been trading below its average historic valuations for the most part of last two years, is now within a whisker of the nine-year average one-year forward multiple of 16.1 times. Bloomberg data show India is now trading at a multiple of 15.9 times or at their highest valuations, relative to their EM counterparts, since February 2011.
India’s CAD for the quarter ended December fell to 0.9% of GDP or $4.2 billion, from 6.5% a year earlier. “It’s a combination of factors that has pushed the market higher. We are in the midst of a pre-election rally and the CAD data too has been supportive,” Andrew Holland, CEO, Ambit Investment Advisory, said.
“Investors seem to be looking at the best case scenario and are betting on a stable government that will give reforms a push,” Holland of Ambit Investment Advisory said.
Recent opinion polls suggest that the BJP-led NDA alliance is gaining momentum and is poised to get close to the ‘magic number’ of 272. The recent buying streak by FIIs is their longest since the start of November 2013. FIIs net bought $208 million of Indian shares in the cash segment on