Bangalore: Indian shares reset 32-month highs for the fourth straight session on Wednesday driven by continued robust foreign fund inflows and a catch-up rally in index-heavyweight Reliance Industries Ltd.
India’s top software services exporters, which derive more than half their revenue from the United States, joined the party as promising US retail sales data boosted optimism over recovery in the world’s largest economy.
The market took in its stride India’s widening trade gap, which stood at a 23-month high in August, and a higher deficit outlook for the financial year ending March 2011. But, the trade secretary said the bulging deficit was not yet a problem and could be financed.
The 30-share BSE index ended up 0.8% at 19,502.11 points, with 17 of its components advancing. It hit a high of 19,554.50 points, its highest since January 2008.
“Foreign institutional investor money is what is driving the market as of now and will continue to drive as long as there is no major upheaval in the international markets,” said Ambareesh Baliga, vice president at Karvy Stock Broking.
“When money is chasing growth, it is difficult for us to fix a valuation for the market. It is the money that decides the valuation.”
India, Asia’s third-largest economy, is expected to surpass government estimates for an 8.5% growth in 2010-11 boosted by a surprise 13.8% jump in factory output in July.
Foreigners have poured in $14.3 billion into Indian stocks so far this year helping the benchmark index rise 11.7%. In 2009, a record foreign fund inflow of $17.6 billion led to an 81-percent surge in the index.
Reliance Industries, which was down 9.3% this year until Tuesday on concerns over diversification into non-core businesses and delay in ramp-up of gas production, surged up 2.3% to close at Rs 1,010.45.
Tata Consultancy Services and Infosys Technologies, India’s top two technology firms, scaled new highs earlier in the day. TCS closed up 2.2%, while Infosys and No. 3 ranked Wipro rose 2.5% and 2.3% respectively.
Financials closed mixed ahead of the central bank’s mid-quarter policy review on Thursday, when the bank is widely expected to raise key interest rates by 25 basis points..
Top lenders State Bank of India and ICICI Bank closed down 1.7% and 0.1% respectively. HDFC Bank and mortgage lender Housing Development Finance Corp bucked the trend notching up 1.8% and 1.3% gains respectively.
Vehicles maker Tata Motors hit a new high in at least 20 years for the second straight session before a lower-than-expected 29% rise in August global vehicle sales pushed the shares down 2.9% at close.
Top utility vehicle Mahindra & Mahindra also scaled a record high and ended up 0.95%. Leading car maker Maruti Suzuki gained 1.8%.
In the broader market, losers led gainers in a ratio of 1.4:1 on volume of 558.2 million shares.
The 50-share NSE index was up 1.1% at 5,860.95 points.