Mumbai: Rising foreign fund inflows, which propelled Indian shares to scale a fresh 32-month peak for the sixth straight session on Monday, also raised concerns whether the market was rising too soon too fast.
Financials led the rally, which saw the benchmark index close 1.6% higher, on robust loan demand outlook in the world’s second-fastest growing major economy.
The 30-share BSE index rose 1.59% or 311.35 points to 19,906.10, with 25 of its components closing in the green. It touched 19,927,30 points intra-day, its highest since January 2008.
“The biggest push is the huge amount of money that is coming in from overseas,” said Krishna Sanghavi, head of equities at Kotak Asset Management. “Though all rationale as to economic growth and earnings growth is in place, the concern is we are seeing too much money coming in a bit too fast.”
Foreign funds have bought a net $15.8 billion of Indian equities so far this year, which has helped the main index gain nearly 14%. This follows a record $17.5 billion net investment in 2009, which had seen the index rally 81%.
For the year to date, the Indian benchmark has outperformed MSCI’s world equity index .MIWD00000PUS and its emerging markets index which have gained 0.1% and 5.1% respectively in the period.
Top lender State Bank of India gained 0.4% while leading private lenders ICICI Bank and HDFC Bank climbed 1.2% and 1.9% respectively.
Cigarette-to-hotel business ITC climbed as much as 5.9% to Rs178.30, its highest level in at least 20 years, helped by robust domestic consumption.
Energy major Reliance Industries climbed 1.3%, as it caught up with the broader market rally after the recent underperformance. The stock, which has the heaviest weight on the main index, is still down 4.6% in 2010.
“The stocks which had missed out on the broader rally are now catching up,” said Kunal Sukhani, manager of institutional equities at Asian Markets Securities.
Leading telecom companies Bharti Airtel and Reliance Communications which were the only two Sensex negatives to log a yearly loss last year, significantly underperforming the main index, firmed 2.4% and 5.1% respectively.
“We initiate coverage on Bharti with thumbs up to Africa,” JM Financial said in a note adding they arrive at a ”buy” rating for the stock.
Idea Cellular bucked the trend and slipped 1.4% as it said it continuously evaluates stake-sale proposals from time to time.
Export-focused outsourcers continued to rise with sector leader Tata Consultancy Services scaling a new record high at Rs921.50.
“We remain positive on tier-1 IT companies on the back of significant market share gains against global incumbents,” JM Financial said in a note last Friday, adding that Infosys Technologies was its top sector pick.
Infosys and Wipro rose 1.1% and 0.1% respectively, while TCS gave up early gains and shed 0.2% at close.
Hero Honda, the country’s leading motorcycle maker, firmed nearly 4% after a report suggested KKR & Co, TPG Capital, Carlyle Group and Bain Capital LLC are competing to acquire a part of Honda Motor Co’s stake in the company.
Bharat Heavy Electricals Ltd slipped 0.2% as Credit Suisse downgraded the stock to “neutral” from “outperform”. The brokerage expects the state-run firm’s sales growth to moderate from 2012/13 (April-March) with no order inflow growth in the past two years combined with negative growth rates ahead and extension of execution cycles.
Advancing shares outpaced declining ones in the ratio of 1.5:1 in relatively higher volume of 542 million shares.
The 50-share NSE index .NSEI climbed 1.6% to 5,980.45 points.
Elsewhere, the FTSEurofirst 300 index of top European shares were up 0.7% by 2:08pm, while the MSCI’s measure of Asian markets other than Japan firmed 0.5%.
KSK Energy Ventures rose 5.5% to Rs182.35, after the utility said it had tied up $3.6 billion for its 3,600 megawatt thermal power project in central India.
Software services firm Hexaware Technologies jumped 9.5% to Rs78.80, after it said it had raised its revenue outlook for the third quarter.