Mumbai: The BSE Sensex rose 0.6% on Friday, extending its weekly run of gains to 13 in a row for the first time in four years, as signals the global economic turmoil was abating boosted risk-appetite across Asia and Europe.
The 30-share BSE index, which climbed to its highest close in almost 10 months, rallied 3.3% on the week and boosted its rise to 88 percent from a 2009 low in early March.
Hefty foreign portfolio inflows of more than $6 billion since mid-March and expectations the ruling coalition will pursue investor-friendly reforms to boost growth after it won a second five-year term in May have underpinned the market.
“We expect the new government eventually to take the unique opportunity provided by the election results and accelerate the pace of reforms,” said Sebastien Barbe, head of emerging markets research at Calyon, a part of the Credit Agricole Group.
ICICI Bank rose on hopes a revival in economic growth will lead to fewer defaults and spark credit growth.
Outsourcer Infosys Technologies, which gets most of its revenue from the United States, gained on signs the U.S. recession was easing.
Engineering and construction firm Larsen & Toubro climbed on hopes higher spending to overhaul India’s crumbling infrastructure will boost its orders and earnings.
Diversified cigarette maker ITC bucked the trend and fell after the government of the western Maharashtra state raised the tax on cigarettes to 20% from 12.5%.
The BSE index ended up 0.63%, or 94.87 points, at 15,103.55, its best close since 12 August last year. Its weekly run of gains was the best since a 16-week rally in May-August 2005.
Twenty index components rose, while in the broader market, gainers led losers 1,520 to 1,325 on relatively heavy volume of 830.9 million shares.
“The sense that I get from the people in the market is that there is a lot of cash sloshing around the world, waiting to be deployed,” Jayesh Shroff, who helps manage about $1 billion in equities at SBI Mutual Fund, said.
Hopes for reforms such as privatisation, easier foreign investment rules in the insurance and pension sectors and a ramp up of infrastructure spending from the government have also boosted investor confidence.
“The rather large victory by the Congress (party) has provided the country with one of those moments that happens only every 15 or 20 years in India,” Barbe said.
“A strongly backed coalition, having reduced its reliance on smaller/regional/leftist parties, could try to implement more audacious reforms.”
The BSE index is up 57% this year, making it one of the best performing markets in the world, after it slumped by more than half in 2008 when risk-wary foreign funds pulled out about $13 billion.
There are concerns valuations are expensive, but faster economic growth on increased reforms is expected to fuel corporate earnings and justify share prices, analysts said.
“The economic situation is much better than in the rest of the world on average, and one could reasonably expect the Indian economy to be on the verge of stabilisation,” Barbe said.
ICICI Bank gained 2.3% to Rs751.15, a day after it said it would cut lending rates by 50 basis point from Friday.
No. 2 IT-services firm Infosys Technologies climbed 3.9% to Rs1,690.55, taking gains for the week to 5.5%.
Larsen rose 4.35% to Rs1,519.30 and ended the week up 8.1%,
ITC dropped 5.5% to Rs191.40. Cigarette sales in Maharashtra form less than 10% of ITC’s cigarette sales, but the tax increase could trigger other cash-strapped state governments to drive tobacco taxes higher, Deutsche Bank analyst Harrish Zaveri said.
Energy giant Reliance Industries, which has the most weight in the main index, fell 1.9% to Rs2,211.85, after more than doubling in value since early March.
The 50-share NSE index rose 0.3% to 4,586.90.
Asian markets were higher on Friday after a Wall Street rally overnight. Japan’s Nikkei rose 1%, while MSCI’s measure of other Asian markets advanced 1.2%.
At 4:00pm, the FTSEurofirst 300 index of top European shares was up 0.4%.
Fewer US workers filed new claims for jobless benefits for a third straight week last week and productivity rose faster than expected in the first quarter, data showed on Thursday, supporting budding hopes that the recession is losing force.