Sensex, Nifty at all-time highs

Sensex, Nifty at all-time highs

Mumbai: If the Sensex’s performance on Tuesday, when it gained 788.85 points, is any indication, Indian stock markets aren’t nervous about the coming earnings season or the spectre of an early election.

The Sensex had shed 282 points on Monday, largely because Tuesday’s meeting of the Congress and the Left Front on the Indo-US civilian nuclear deal was seen as one that could either make or break the government. However, the two parties agreed to continue their discussions on a later date. “Where is the crisis?" asked A.B. Bardhan, the general secretary of the Communist Party of India, a constituent of the Left Front. “We are meeting again on 22 (October)."

That gives the government more time; and, it gives investors more time to buy before they eventually sell.

On Tuesday, the Sensex closed at 18,280.24, 4.51% up from Monday’s close of 17,491.39, and the Nifty closed at 5,327.25, up 4.76% from Monday’s 5,085.10. Both indices closed at all-time highs.

UP, UP AND AWAY (Graphic)

TOP 10: Biggest daily gains in the Sensex (Graphic)

The Sensex has risen almost continuously since 18 September, when the US Federal Reserve cut interest rates in that country. Investments by foreign institutional investors (FIIs) since then have propelled the Sensex up 16.6% from 15,669.12. In the past month alone, FIIs have invested more than $5 billion (Rs19,800 crore) in Indian stocks, and more than $2.3 billion since 1 October. “Investors seem to have paused and thought about whether an election will mean any change in policy or direction, said no and gone ahead with their investments," said Sandeep Bhandari, managing director and head of global markets (South Asia) at Standard Chartered Bank.

“Global equities look good right now and we had said that Indian markets will not stay out of the party for long," said Devina Mehra, managing director of First Global, a domestic brokerage. “We had written a report titled ‘Be unafraid, very unafraid’ a month ago and I stick by that."

“Many international funds were worried about redemptions due to subprime mortgage issues and were holding back their investments into countries such as India. Now, as the subprime worries have taken a back seat, these investors have started investing again" said Zac Rosenberg, co-head of Asian Equities at Fox-Pitt, Kelton (Asia) Ltd, a company that advises global investors.

Domestic investors do not share this optimism. On Tuesday, they sold equities worth Rs529 crore even as FIIs bought equities worth Rs1,416 crore, according to provisional numbers on the website of the National Stock Exchange.

Several analysts said they did not expect the reform policy to change even if an election did take place.

“If you look back, there have not been any changes in policy when different parties have come to power," said Krishna Kumar Karwa, managing director of Emkay Securities, a domestic brokerage. “It is as if we are on a train track going in one direction."

According to Nandita Agarwal Parker, managing director, Karma Capital Management Llc., a US-based equity fund, the “feeling among FIIs is that whichever party comes to power, it will continue the same economic policies".

The Sensex has taken eight trading sessions to move from 17,000 to 18,000 (it took five to move from 16,000 to 17,000). While the Mukesh Ambani-controlled Reliance Industries Ltd contributed 181 points to the index’s march from 17,000 to 18,000, Anil Ambani-controlled Reliance Energy Ltd and Reliance Communications Ltd contributed 76 and 88 points, respectively.


(Ashish Sharma in New Delhi contributed to this story.)