Buoyed by strong global cues as also positive news flow on the political front, Indian equities rallied smartly on Thursday with the benchmark Sensex crossing the psychological 19,000-point mark to close at its highest level in 19 months.
Foreign brokerage Goldman Sachs upgraded Indian stocks to ‘overweight’ from ‘market-weight’, setting a December 2013 target of 6,600 points for the 50-share Nifty index, a 13% upside from current levels. The brokerage cited growth recovery and inflation moderation for its revised target. Earlier this week, Morgan Stanley set a probability-weighted target of 23,069 points for the Sensex for December 2013, implying a 26% upside, citing a steady recovery in broad earnings growth.
Foreign institutional investors continue to shop for Indian equities; with Tuesday’s purchases of $288 million, they have now bought stocks worth more than $19.7 billion so far in 2012, the largest amount in Asia this year. India remains among the best performing markets this year with the Sensex having posted dollar returns of 20.1 %, way above the 6.3% gained by Indonesia and 10.5% clocked by Taiwan. The Shanghai Composite has lost 9.7%.
Asian stocks also rallied on Thursday on optimism that the US would reach a budget deal before the end of the year to avoid a fiscal crisis. The Nikkei 225 and the Hang Seng indices each rose by 0.99%, while the Kospi and Straits Times indices rose by more than 1% each. The only index to buck the trend was the Shanghai Composite, which dipped by 0.51%.
What enthused the market is principally the resolution on Thursday of the gridlock in Parliament over foreign direct investment (FDI) in retail, after the presiding officers of both Houses allowed discussion on the issue under rules that entail voting. This revived hopes that the government might be able to get parliamentary assent for at least some of the key reform Bills during this session.
After the impasse ended, the House started transacting business — the Lok Sabha later in the day approved a Bill expanding the definition of money laundering offences. With just 16 days remaining of the winter session, the government is expected to push the insurance and pension Bills meant to boost the financial sector and other economic and governance reforms that need legislative backing like the Direct Taxes Code, the land Bill and the lokpal Bill.
While the Lok Sabha will discuss retail FDI on December 4 and 5 followed by voting on