Mumbai: The BSE Sensex rose the most in 3-½ months and scaled new 32-month high on Monday, as investors cheered robust July factory output, with strong world markets also boosting sentiment.
Financials topped the gainers with top lender SBI and HDFC Bank hitting an all-time high in expectations demand for loans would rise on the back of strong economic growth in Asia’s third-largest economy.
Data released last Friday showed July industrial output accelerated 13.8% on surging capital goods production, strengthening the case for monetary tightening by the central bank to tame near double-digit inflation.
The markets were closed for a local holiday on Friday.
The 30-share BSE index rose for the fifth straight session and climbed 2.17% or 408.67 points to 19,208.33, with 26 of its components advancing. It rose to as much as 19,243.44 points, its highest since January 2008. The 50-share NSE index climbed 2.1% to 5,760 points.
“We are bullish on the market from a long-term perspective. But in the near term, the current levels have already priced in FY11 valuations,” said Dipen Shah, senior vice-president of research for private client group at Kotak Securities.
“Liquidity is driving the market higher, but we need to have clarity on FY12 earnings.”
Shah expects Sensex to rise to 19,500 points at end-December and to 23,000 points by end-June 2011.
Foreign funds have pumped in $13.5 billion into Indian equities so far in 2010, driving the benchmark index nearly 10% higher, in addition to record inflows of $17.5 billion, which led to an 81% rally in 2009.
In the year so far, Indian equities were the second-most preferred bet in the region after Japanese shares, which received foreign fund flow to the tune of $20.2 billion, data from Nomura showed.
Top lender State Bank of India closed 5.5% higher, after rising as much as 6.5% earlier to an all-time high of 3,175 rupees.
HDFC Bank rose as high as 2,294 rupees and closed 1.9% higher at Rs2,282.15, while ICICI Bank scaled a 31-month-high to end 4.4% higher.
“Credit growth is expected to pick up. Market participants believe there may not be a steep (interest rate) hike (at the (central bank policy review on Thursday),” said Shah.
Global regulators agreed on a set of radical new capital rules for banks on Sunday that could free up stronger lenders to release surplus cash while forcing some laggards to raise funds.
Energy giant Reliance Industries, which has the highest weight on the main index, climbed 3.6%, catching up with the rally in the broader market after recent underperformance. The stock is still down nearly 9% year to date.
Export-oriented software companies gained on expectations of better economic outlook in the United States, their key market.
Top outsourcer Tata Consultancy Services climbed 0.9%, while rival Infosys Technologies firmed 1.5%.
Wipro, the No. 3 outsourcer, bucked the trend and dropped 1.3%.
A senior Wipro official told Reuters customers remain cautious about technology spending, with budgets flat-to-slightly higher as they look for transformational projects.
State-run explorer Oil & Natural Gas Corp gained 1.5% after the oil secretary told reporters on Saturday the company would make a joint bid with PetroVietnam for BP’s Vietnam assets after completing evaluation in the next few weeks.
In the broader market, advancing shares and declining shares were nearly equal, on a moderate volume of 462 million shares.
World stocks rose on buoyant Chinese factory data and as a deal on global bank rules gave lenders some respite before having to raise hundreds of billions of dollars in fresh capital.
The index of leading European shares was up 0.9% at 1019 GMT, while MSCI index of Asian shares outside Japan added 1.9%.
Kale Consultants closed up 12.9% at Rs161.15 after the company, which provides software for travel and logistics sector, said the founders agreed to sell 35.6% stake to Accelya Holding World at Rs172 a share.
Real estate firm Omaxe Ltd (OMAX.BO) gained 1.8% to Rs136.60 as its unit won contract worth Rs128 crore.
Wheel-rims maker Steel Strips Wheels rose 3.2% to Rs271.25 as it won an export order from a% to Rs271.25 as it won an export order from a supplier in Germany.