Mumbai: Indian shares climbed 1.1% to their highest in two-and-a-half years on Thursday, supported by the outlook for robust domestic growth and firm global markets.
Financials were among the top gainers on the back of rising inflows from foreign institutional investors (FIIs) who have been lured by 8.5% economic growth forecast this year while the developed world struggles to keep a recovery on track.
Consumer spending in Asia is likely to reach $32 trillion by 2030, powered by the emergence of a rising middle class in the fast growing economies of China and India, the Asian Development Bank said in a report released on Thursday.
However, with some blue-chip stocks hitting record highs there are concerns the market could be becoming expensive and foreigners may look elsewhere to buy relatively cheaper stocks.
“I would not go ga-ga about this rally,” said Gajendra Nagpal, CEO of Unicon Financial. “Interest of FIIs is there but domestic money is eluding us.”
The 30-share BSE index closed up 1.08%, or 197.82 points at 18,454.94, with 17 of its components advancing. Winners overwhelmed losers in the ratio of 1.3:1 in the broader market on relatively better volume of 470 million shares.
“No bad news is getting to be good news for the market. It is time to get cautious,” Nagpal said.
The benchmark index hit 18,475.27 during trade, its highest since February 2008 and is up 5.7% in the year to date, outpacing broader indexes such as the MSCI’s measure of Asian shares ex-Japan, emerging markets index and MSCI’s world stocks index.
Foreign funds have poured $11.8 billion into Indian equities so far this year. In 2009, record inflows of $17.5 billion had lifted the BSE index 81%.
Second-largest private lender HDFC Bank rose as much as 2.4% to an all-time high of Rs2,240. Bigger rival ICICI Bank climbed as much as 4.6% to Rs1,015, its highest in 29 months.
Mortgage lender Housing Development Finance Corp rallied as much as 4.4% to 648.50 rupees, its highest since January 2008. Top lender State Bank of India bucked the trend and shed 0.3%.
Energy major Reliance Industries, which has the highest weightage on the BSE index, firmed 1.3%, catching up with the broader market rally after recent underperformance.
The stock is still down more than 10% so far in 2010.
Vehicles maker Tata Motors fell 0.7% after DNA newspaper reported the company plans to raise $700 million through an issue of shares with differential voting rights.
Elsewhere, the pan-European FTSEurofirst 300 index of top shares was up 0.6% by 3:53pm, while MSCI’s measure of Asian markets other than Japan firmed 0.7%.
Unitech slipped 1.5% to Rs83.80 after the National Stock Exchange said the stock would be dropped from the 50-share Nifty index from 1 October.
Bajaj Auto, the country’s second-largest motorcycle maker, climbed as much as 4.4% to a record 2,796 rupees on inclusion in the Nifty.
Sesa Goa and Dr Reddy’s, which are also being included in the index, rose 1.9% and 0.1% respectively.
Sun Pharmaceutical, the top drug maker by market value, rose 1.3% to Rs1,788.40 after it received approval from the US health regulator to sell a copycat version of antidepressant Venlafaxine Hcl ER.
Aban Offshore firmed 6.8% to Rs835.40 after the offshore services provider said it signed a contract with Cairn Energy India.