BSE Sensex, NSE Nifty hit record highs: Here’s why

By: | Updated: November 5, 2014 2:24 PM

Brokers attribute the sustained rally in Indian markets to a combination of global and local factors

Foreign investors or FIIs have been the backbone of this massive rally on the BSE. Foreign investors or FIIs have been the backbone of this massive rally on the Bombay Stock Exchange.

The BSE Sensex crossed the 28,000-mark and the NSE Nifty hit a new peak of 8,363.65 in early trade on Wednesday on sustained FII fund

Brokers attribute the sustained rally to a combination of global and local factors, which include rising optimism that the European Central Bank (ECB), which is scheduled to hold a review on November 9 when it could announce its stimulus programme to revive flagging growth in the Euro-zone. Some of this excess liquidity is expected to be headed India’s way, which is seen to be in a better position to attract capital flows as compared to other emerging market economies on the back of sharply improved fundamentals, a re-rating in valuations and a stable, reformist government at the helm.

Last Thursday, the Bank of Japan had announced plans to accelerate the purchase of government bonds to 80 trillion yen ($725 billion) annually, up by 30 trillion yen, which had sparked off a sustain rally in the equity markets in emerging economies as it comes at a time when
the US was looking for exiting its quantitative easing — or loose monetary — policy.

Among domestic factors, optimism over improved corporate earnings, the possibility of an interest rate cut in RBI’s upcoming December review
and a drop in global crude oil prices, which slipped to its lowest closing since October 2011, have improved sentiments further.

Earlier this week, global ratings agency Moody’s said that it may consider a ratings upgrade on India if inflation stays under control in the long term and the recent measures to boost growth and attract investments are implemented properly.

On Wednesday, the 30-share index surged by 141.57 points, or 0.50 per cent, to hit a new peak of 28,001.95, surpassing previous intra-day record of 27,969.82 achieved on Monday.

Foreign investors or FIIs have been the backbone of this massive rally that we have seen on the BSE Sensex. The index has rallied nearly 32
per cent so far in the year 2014, with FIIs having already pumped in $14bn into domestic equity capital markets this year.

With the Indian markets expected to see fresh inflows from Japan and possibly from Europe, foreign inflows into equities are likely to rise from the present $14 billion to an estimated 25 billion by 2014-15, according to projections.

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