Indian equities surged nearly 1.5% on Friday, their biggest single day gain in two weeks, backed by strong institutional buying as growth in India’s manufacturing sector rose to two-year high. Global cues further helped markets on hopes of continued foreign inflows as European Central Bank President, Mario Draghi hinted at likelihood of large-scale quantitative easing.
Foreign portfolio investors (FPIs) purchased nearly $41 million of shares in the cash segment, while their domestic counterparts bought roughly $12 million of Indian equities, showed provisional data from stock exchanges. Dealing room checks indicated that domestic mutual funds and FPIs bought hefty amounts in the derivatives (F&O) segment on Friday.
International investors bought a net $87.6 million of local shares on December 31, taking their total purchases in 2014 to $16.1 billion, the second-most in Asia, after Japan. The Sensex rallied 30% in 2014, the most among the world’s 20 biggest markets after China.
On Friday, the Sensex continued its positive performance with a 1.38% or 380.36 points gain to end at 27,887.90. The Nifty rose 1.35% or 111.45 points to end at 8,395.45. The Nifty reclaimed crucial psychological level of 8,400 intraday.
India’s manufacturing Purchasing Managers’ Index (PMI) rose to 54.5 in December, the highest since December 2012, from 53.3 in November, according to data released on Friday by HSBC & Markit Economics. A reading above 50 indicates an expansion.
Market breadth was strong. 25 out of 30 Sensex companies ended in the green. Overall, 1,772 stocks gained as compared with 1,164 stocks that ended with losses.
Shares of banks, capital goods and construction companies were in demand as the government pledged to increase investment to build roads.
On Thursday, the government raised excise duties on automobile fuels by R2 per litre – the third since November – with an intention to build an additional 15,000 kilometres of highways in the next three years.
Talks of bank consolidation and discussions to improve India’s banking sector at the two-day banking conclave that began on Friday also boosted sentiment. The Bank Nifty rose 1.64% to an all-time high of 19,057.80.
ICICI Bank rose 3.04% to a record as a two-day meeting of bank chiefs and regulators started in Pune. Axis Bank, Yes Bank, and IndusInd Bank gained in the range of 0.5-2.8% to touch their respective life-time highs.
Some of the state-run lenders were in focus of a gathering of bank chiefs and regulators from today as they seek to reverse companies’ lowest profitability in at least nine years. United Bank of India jumped nearly 6%, while IDBI Bank, Bank of Maharashtra, Bank of Baroda, and Bank of India gained in the range of 1-3%.
“Don’t remain short. Be in an investment mode. This is a very important conclave… The head honchos of banks, insurance companies are going to interact with the PM, the FM and the RBI governor. This will keep the embers hot and get the markets in action mode on Monday,” said Aseem Dhru, MD & CEO, HDFC Securities.
L&T jumped the most in two weeks, while Ashoka Buildcon climbed to a five-month high. BHEL added 2.5%, capping a gain each day of this week.
Mining and metal companies Tata Steel, Hindalco, and Sesa Sterlite advanced 1-1.5% each. Tata Steel restarted one of its biggest iron ore mines in eastern India, four months after it was ordered to suspend operations pending lease renewal, officials familiar with the matter said.