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Business News/ Market / Stock-market-news/  Sensex closes in on lifetime high
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Sensex closes in on lifetime high

BSE's 30-share index gains 2.3% to move to within 122 points of its best close ever posted on 5 November 2010

All sectoral indices of BSE were in the green, with the banking index—the Bankex—contributing the most with a 3.93% gain. Photo: Hemant Mishra/MintPremium
All sectoral indices of BSE were in the green, with the banking index—the Bankex—contributing the most with a 3.93% gain. Photo: Hemant Mishra/Mint

Mumbai: India’s benchmark equity index was poised within striking distance of its lifetime closing high on Friday after surging the most in Asia, buoyed by a set of strong corporate earnings and the hope that the US will maintain its economic stimulus at least into the next year.

BSE’s 30-share Sensex gained 467.38 points, or 2.3%, to 20,882.89, a three-year high—just 122 points away from its best closing ever. That record was set on 5 November 2010, when the benchmark ended at 21,004.96.

A combination of positive global and domestic cues drove the gains, and analysts say there is enough steam left in the rally for the Sensex to rise to a new record.

On Thursday, US legislators passed a Bill to raise the federal debt limit and put an end—at least temporarily—to the partial shutdown of non-essential government services since the beginning of this month because of a logjam in the US Congress.

Additionally, much-awaited clarity emerged that any tapering of the quantitative easing programme in the US, under which the Federal Reserve has been buying $85 billion of bondsevery month, would happen only next year. That would keep open the liquidity tap for emerging markets.

Markets elsewhere too rose. The S&P 500 Index rose to a lifetime high as US markets opened on Friday. At 10.15pm India time, the index had gained 0.44% to 1,740.79.

Among key European indices, the UK’s FTSE 100 gained 0.71% to 6,622.58, France’s CAC 40 rose 1.09% to 4,286.03 points, and Germany’s DAX advanced 0.60% to 8,865.10 points.

Markets elsewhere in Asia were mostly positive. Singapore’s Straits Times Index gained 0.2% to 3,192.90 points, China’s Shanghai Composite Index rose 0.24% to 2,193.78 points, and Hong Kong’s Hang Seng Index advanced 1.06% to 23,340.10.

In India, domestic concerns abated after the local currency strengthened over the past few weeks and companies reported strong earnings. On Friday, the rupee touched a two-month high of 60.9325 per dollar before ending at 61.2650, down 0.07% from its previous close.

Profits at all six Sensex companies that have announced earnings for the quarter ended 30 September so far have exceeded or matched analyst estimates. About 47% of the 30 companies in the index had missed forecasts in the previous quarter.

“The earnings season has begun on a good note and fund inflows have been steady, and that’s holding up markets quite well," said Kaushik Dani, a fund manager at Peerless Mutual Fund, which has about $725 million in assets.

Infosys Ltd, India’s second largest software exporter, reported a 1.6% rise in net profit to 2,407 crore for the quarter ended September, higher than Street expectations of 2,200 crore.

Tata Consultancy Services Ltd’s net profit rose 34.9% to 4,633 crore, higher than a 45-analyst estimate compiled by Bloomberg. Reliance Industries Ltd’s second quarter profit rose 1.5% to 5,490 crore, beating Bloomberg analyst estimates.

Metals and mining stocks rose as China’s economic growth quickened for the first time in three quarters. The country is the biggest export market for Indian metal and mining firms, and the economic recovery there sparked hopes of higher demand.

Shares of Sesa Sterlite Ltd rose 6.05% to 195.30, and Tata Steel Ltd gained 5.92% to 382.45.

“China’s GDP (gross domestic product) growth is a positive news for our metal and mining firms. Secondly, the raising of debt ceiling in the US clarifies that the Federal Reserve will not go ahead with tapering in quantitative easing. That ensured that there will be no liquidity concern at least as far as FII (foreign institutional investor) flows are concerned. Markets rallied on these two factors," said Sudip Bandyopadhyay, managing director and chief executive of Destimoney Securities Pvt. Ltd.

“If the liquidity remains, the market rally will continue and may breach its earlier highs," he added.

On Friday, for the 11th consecutive session, FIIs bought more shares than they sold. FIIs bought shares worth 1,752.98 crore, according to provisional data from the exchanges. Since the beginning of the year, FIIs have bought Indian shares worth $14.48 billion on a net basis.

All sectoral indices of BSE were in the green, with the banking index—the Bankex—contributing the most with a 3.93% gain. ICICI Bank Ltd, the largest private sector lender, jumped 4.44%, and HDFC Bank Ltd, the biggest by market value, gained 3.46%.

Bajaj Auto Ltd was the lone loser among the 30 frontline stocks of BSE. It lost 0.56% to close at 2,152.85.

Some market experts were sceptical about the surge, saying the return of consumer demand is key to sustaining the gains.

“The markets are gaining on the back of liquidity because FIIs continue to buy as they feel the stock pricing is still fairly valued in India," said Vikrant Gugnani, executive director at Reliance Securities Ltd. “But the fundamentals of stocks will change and the market will see a sustainable run only if the demand from consumers comes back."

The Sensex has risen 7.5% this year so far and is valued at 14.3 times estimated 12-month profits, against the MSCI Emerging Markets Index’s 10.8 times.

Bloomberg contributed to this story.

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ABOUT THE AUTHOR
Anirudh Laskar
Anirudh reports on significant corporate matters including large mergers and acquisitions, India's emerging e-commerce sector and regulatory issues in the corporate and financial services industry. Over the past 17 years, he has covered many beats including banking, NBFCs, aviation, automobile, insurance, markets, SEBI, IRDAI, mutual funds, investment banking, private equity, deals, and conglomerates.
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Published: 18 Oct 2013, 10:13 AM IST
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