Mumbai: Indian share prices closed 1.25 percent higher on 1 February 2007 as funds were optimistic an upward revised full-year growth forecast of 8.5-9.0 by the central bank would come through, dealers said.
They said buying was hectic in cement, capital goods and automobile companies.
The 30-share Mumbai stock exchange Sensex index rose 176.26 points to 14,267.18, just shy of its record of 14,282.46 last Thursday.
“The markets could see a fresh surge. We expect foreign funds to buy into Indian equities at this stage,” said Hiten Mehta, a fund manager with Fortune Financial Services.
On Wednesday, India’s central bank raised its growth forecast for the year ended March from above 8.0 percent while hiking its short-term borrowing rate by a quarter percentage point to 7.50 percent to stem rapid inflation which hit a two-year high in January.
Overseas funds bought $7.99 billion of Indian equities last year on top of more than $10 billion in 2005.
In a similar fashion, the Nifty index on the National Stock Exchange was up by 47.65 points at 4,130.35.
Market observers said the Union Cabinet’s approval to transfer the Indian cCentral bank’s stake in State Bank of India to the government and the Rs 23-crore revival package for HMT Machine Tools Ltd, triggered the buying activity.
State-run State Bank of India stocks flared up by Rs 90 at Rs 1,229 on all-round buying activity.
Other major gainers were ICICI Bank, Reliance Industries, Reliance Capital, Reliance Energy, NTPC, ACC, Maruti and Bajaj Auto.
The sensitive index rose for the first time in three days , led by Wipro Ltd. after the US Federal Reserve kept the benchmark rate unchanged and acknowledged the economy is picking up after a slowdown last year.
“The US Fed keeping the rate unchanged is a positive signal, as it will mean uninterrupted flow of overseas investment,” said R.K. Gupta who manages the equivalent of $66 million in Indian stocks at New Delhi-based Credit Capital Asset Management.
US stocks climbed on 31 January 2007 completing their longest stretch of monthly gains in more than a decade. Fed policy makers left their benchmark lending rate unchanged at 5.25 % and said the economy is picking up while the pace of price increases has slowed.
Stocks also rose on central bank’s assurance yesterday that it won’t take any measures that may halt growth. The Reserve Bank of India also raised the nation’s growth forecast for the year ending March, to 9 percent.
“The assurance is a big relief and indicates the budget may not be harsh,” Gupta said.