Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Money / Market/  Reforms fuel market rally expectations
BackBack

Reforms fuel market rally expectations

Analysts raise targets for Sensex, Nifty as government’s policy measures seen reviving investor interest

The BSESensex might reach 23,000 points by the end of December 2013, according to a 17 September report by Morgan Stanley Asia. Photo: Hemant Mishra/Mint (Hemant Mishra/Mint)Premium
The BSESensex might reach 23,000 points by the end of December 2013, according to a 17 September report by Morgan Stanley Asia. Photo: Hemant Mishra/Mint
(Hemant Mishra/Mint)

Mumbai: India easing restrictions on overseas investment in retail and aviation, and renewed interest of foreign institutional investors (FII) in buying local equities may see a stock market rally continue, analysts said.

BSE Ltd’s benchmark Sensex rose 2.2% on Friday to 18,752.83 points, its highest in 14 months. The index is now some 2,250 points shy of its highest close of 21,004.96 on 5 November 2010.

In 2012, the broader, 50-share Nifty index on the National Stock Exchange rose 23.07% to 5,691 points, the best performing index worldwide after Thailand’s SET, which gained 25.45%. The Sensex has climbed 21.34% so far this year.

“We are raising our December 2012 Sensex target to 20,000, implying a return of 8% from current levels," Deutsche Bank said in its 17 September India strategy report.

In 2012, foreign institutional investors have bought stocks worth a net $13.99 billion, compared with a net $500 million they sold in the same period last year.

“The timing of India’s announcements has propitiously combined with the positive announcements from Europe and US central bankers, and will ensure that India does not miss out on the ongoing global risk rally," the German lender said.

Prime Minister Manmohan Singh on Saturday said India must build a climate that attracts investment, a week after his government allowed overseas retailers to operate multi-brand retails shops in the country and foreign airline firms to buy stake in local carriers.

The reform measures were announced at a time when central banks in the US and Europe have started their latest round of stimulus to revive their economies.

“Investors have been waiting for bold reforms, which are now coming fast and furious," said Tarun Kataria, chief executive officer of Religare Capital Markets Ltd, a financial services firm. “This also happened when the Fed (US Federal Reserve) and the ECB (European Central Bank) announced their liquidity programmes. All the money was sitting on the sidelines waiting to come in and that has resulted in this aggressive rally."

The Sensex might reach 23,000 points by the end of December 2013, according to a 17 September report by Morgan Stanley Asia Ltd.

“Margins (of Indian companies) could rise in the coming months with a favourable base effect driven by the relative movement in the current and fiscal deficit," the brokerage arm of the Wall Street bank said in the report. “Interest rates are already down year on year, and that should stem the steep rise witnessed in interest costs in the previous 12 months."

The United Progressive Alliance government on 13 September increased diesel prices by 5 to reduce subsidies on the fuel and narrow a fiscal deficit.

The Wholesale Price Index, the most widely tracked measure of inflation in India, rose 7.55% from a year earlier and from 6.87% in July. In its meeting held last week, the Reserve Bank of India left both repurchase and reverse repo rates unchanged, but sprang a surprise by reducing by 0.25% the proportion of deposits banks need keep with it.

“The government seems to be on a policy offensive, as it refused to buckle under political pressure to roll back last week’s measures and chose to announce new ones," fund house Franklin Templeton Investments said in its weekly market review.

“FIIs will continue to chase this market having missed the rally at the start of the year," Kataria said. “Right now liquidity is winning, so to see 21,000 on the Sensex and 6,000 on the Nifty should not surprise us."

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 23 Sep 2012, 11:34 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App