Indian shares head for best yearly gain since 2009

By: | Updated: December 31, 2014 4:33 PM

Indian shares edged up on Wednesday, capping a record-setting year with hopes that the momentum...

year-ender, year-ender 2014, shares, Indian sharesForeign investors were key to the rally, buying a net .1 billion in shares so far this year, the biggest net purchase since buying .4 billion worth in 2010. (Reuters)

Indian shares edged up on Wednesday, capping a record-setting year with hopes that the momentum would sustain in 2015 should the government announce additional economic reforms and the central bank start cutting interest rates.

The broader NSE index has gained 30.8 percent this year as of Tuesday’s close, posting its best gain since 2009 in a year marked by a series of record highs. In dollar terms, the index was the second best performer in Asia after Shanghai , according to Thomson Reuters data.

The election of Prime Minister Narendra Modi and efforts by Reserve Bank of India Governor Raghuram Rajan to cut down inflation have been widely credited by investors as setting the stage for the strong show of shares.

Foreign investors were key to the rally, buying a net $16.1 billion in shares so far this year, the biggest net purchase since buying $29.4 billion worth in 2010.

Analysts say that with inflation under control, the RBI can now afford to ease interest rates while they are hopeful that Modi will introduce additional policy reforms after measures on land acquisition and insurance this month.

“In 2015, India will shine. Valuations are not that expensive,” said Sandeep Nayak, executive director and CEO of Centrum Stock Broking.

“Further, capital earmarked for emerging markets and BRICs in 2015 is likely to flow aggressively into India given its relative attractiveness,”

The broader NSE index rose 0.31 percent to 8,273.2 on Wednesday. It had hit a record high of 8.626.95 on Dec. 4.

The benchmark BSE index rose 0.28 percent to 27,480.09 in the last day of the year, having set its record high of 28,822.37 on Nov. 28.

Power and infrastructure stocks were among the gainers on hopes of reform measures. Bharat Heavy Electricals Ltd  gained 1.7 percent, while NTPC Ltd added 0.7 percent.

However, auto stocks fell on reports that the government will not extend tax breaks to auto makers beyond Dec. 31. Mahindra and Mahindra was down 1.6 percent and Maruti Suzuki was 0.5 percent lower.

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