Mumbai: India’s main stock index raced to a 17-month high on Wednesday as the market caught up with sharp gains across the region after a day’s holiday, with financial issues leading the surge on improving economic outlook.
Investors were also upbeat after a top policy adviser said the central bank was likely to hold interest rates at a near decade-low when it reviews policy on 27 October, reinforcing expectations the government’s priority was to boost growth.
The 30-share BSE index closed up 1.2%, or 204.44 points, at 17,231.11, with 25 of its components advancing. It rose to 17,274.59 during trade, its highest since 21 May 2008.
“We may rise another 500-600 points from here but we should correct after that, as we have risen too fast,” said Amitabh Chakraborty, president of equities at Religare Capital.
He said profit-taking was imminent.
The market has gained almost 79% so far this year, and the benchmark has more than doubled from 8,047.17 points struck in early March.
Surging foreign portfolio investment on the back of a recovering economy have underpinned the market, with the inflow since the start of January edging towards $13 billion -- about the same that had flowed out last year.
“It is all a money game right now,” said Naresh Kumar Garg, CEO of Sahara Mutual Fund. “Investors should await more cues and be more careful.”
State Bank of India led the gainers after the top lender said it was looking to raise up to $1 billion in bonds to fund growth. The stock closed up 4.5% at Rs2,269.45.
Metals maker Sterlite Industries climbed 5.4% to Rs852.40 after Morgan Stanley raised its 12-month price target on the stock to Rs963.
“In our view, Sterlite offers one of the best and most balanced growth opportunities in Indian metals,” US brokerage said in a note.
Housing Development Finance Corp added 1.5% to Rs2,799.60, after it reported a higher-than-expected 24% rise in its second-quarter net profit late on Monday.
“Given the strong rebound in mortgage loans and disbursements, we expect HDFC to gain earnings traction in 2H FY10, which will continue into FY11,” BNP Paribas Securities said in a note reiterating a ‘buy´ on the stock.
Automobile companies stepped on the gas on expectations for strong earnings as sales volumes accelerated in recent months.
Top utility vehicle maker Mahindra and Mahindra climbed 6.1% while leading vehicle maker Tata Motors firmed 4.1%.
Engineering and construction firm Larsen & Toubro added 2% to Rs1,689.35, after it won orders worth $210 million.
Private sector lender HDFC Bank added 0.1% in seesaw trade, after a forecast-beating 30% rise in quarterly net profit.
Telecom companies bucked the trend and dropped after slower subscriber additions at leading GSM mobile operators Bharti Airtel and Vodafone Essar in September amid intense price competition.
Bharti dropped 3.25% to Rs339.40 and Reliance Communications fell 6.5% to Rs231.60.
Around 507 million shares changed hands on the Bombay Stock Exchange, with advancing shares outnumbering declining ones in the ratio of 1.6:1.
The 50-share NSE index closed 1.3% higher at 5,118.20.