Mumbai: The NSE index rose to a two-year high on Wednesday, breaching the key psychological level of 6,000 at one point, after a US deal on its so-called “fiscal cliff” sparked broad buying, while financial firms extended a recent rally on hopes of a rate cut this month.
US lawmakers approved a plan to prevent huge tax increases and delay spending cuts that together would have pushed the world’s largest economy into a likely recession.
However, despite expectations sturdier global economic growth and the Reserve Bank of India’s (RBI) easing actions would support portfolio inflows, some fund managers warned Indian shares are looking overbought in the near-term after rallying in 2012.
“Ahead of earnings season there would be profit booking in January as corporates may stick to giving cautious outlook,” said Deven Choksey, MD, K R Choksey Securities.
Reversal of interest rate cycle which can spur growth and thereby markets, however, remain key for the medium term, added Choksey.
The benchmark BSE index rose 0.68%, or 133.43 points, to end at 19,714.24, after earlier rising to its highest close since 6 January 2011.
The broader NSE index rose 0.71%, or 42.40 points, to end at 5,993.25.
The index earlier rose to as high as high as 6,006.05 points, marking its highest intra day level since 7 January 2011.
Indian shares have rallied since last year, with the BSE index up 1.5% in the two trading sessions so far this year after surging 25.7% in 2012.
Also aiding the sentiment, India’s manufacturing activity surged to a six-month high in December, boosted by strong factory output and a spike in new orders, both of which hit their highest levels since June, a business survey showed on Wednesday.
Financial shares led the gainers on growing hopes RBI will cut interest rates for the first time since April when it meets on 29 January.
Bajaj Auto Ltd rose 3.3%, marking its all-time high close, after reporting 13% growth in total sales in 20 December.
Shares of Bharat Heavy Electricals Ltd rose 2.3% after the government imposed a 35% safeguard duty on electrical insulators imported from China, in a bid to protect domestic manufacturers from cheaper shipments.
Aurobindo Pharma Ltd rose 4.3%, extending Tuesday’s 2.14% gain, after it said it has got final approvals from US Food and Drug Administration for Rizatriptan Benzoate tablets and the product is ready for launch.
However, among decliners, consumer stocks such as ITC Ltd fell as traders tracked a global “risk-on” mood. ITC fell 0.64%, while Hindustan Unilever Ltd ended 0.02% lower.
Bombay Stock Exchange’s fast-moving consumer goods index rose 46.6% last year, marking it one of the best-performing sectors. Reuters