The index closed at 40,051.87, driven by heavyweights like SBI, TCS and Infosys
FIIs have been net buyers of Indian shares worth $8.87 billion so far this year
Hopes of fresh tax reforms and lower interest rates in the US kept up the market tempo for the fourth straight day on Wednesday, with the benchmark Sensex closing above the 40,000 mark for the first time since 4 June.
The 30-share BSE Sensex rose 220.03 points, or 0.55%, to 40,051.87, just 215.75 points shy of its record 40,267.62 on 3 June. The 50-share Nifty gained 0.49% to 11,844.10.
A mixed bag of quarterly earnings performance and hopes of lower taxes raised hopes among investors. Global markets were mostly cautious ahead of the Federal Open Market Committee (FOMC) meeting ending later on Wednesday.
Ajit Mishra, vice president of research at Religare Broking, said, “Indian indices continued their upward trend on the hopes of more tax sops for the equity markets from the government." He said that in the near term, the market will be driven by corporate earnings and, thus, stock-specific volatility may remain high. “Further, any favourable announcement from the government could help sustain the momentum. On the global front, expectations of an interest rate cut by the US Fed are high and the Fed’s guidance will be keenly watched by investors. In addition, other factors such as oil prices and currency movement may have a bearing on the markets."
The Fed is expected to cut interest rates by a quarter point on Wednesday for the third consecutive time to provide insurance against global risks, while signalling that the committee has probably done enough for now. Investors are pricing in a 90% likelihood of a cut, though economists surveyed by Bloomberg put the odds at 75%. While policymakers see risks from trade uncertainty and weakness abroad, some view the Fed’s cuts in July and September as sufficient to offset those headwinds, absent more shocks.
Higher interest rates in the US typically lead to foreign money flowing out of emerging markets, considered to be riskier assets, while in the case of lower interest rates in the US, there are inflows to emerging markets.
Foreign institutional investors (FIIs) have bought Indian shares worth $710.72 million in October after aggressively selling them following tax proposals in the Union budget that were later rolled back. The budget had raised the surcharge on the ultra-rich that was also applicable to some FIIs. Year to date, FII investments net of selling in Indian markets are worth $8.87 billion.
Rahul Gupta, head of currency at Emkay Global Financial Services, said: “We expect the Fed to cut rates to 1.5-1.75% for the third consecutive time as the unsettled US-China trade war has started taking a toll on the US economic data. The rupee will continue to trade between 70.70-71.30 until we get more clarity on a US-China trade deal."
Domestic institutional investors have been net buyers of shares worth ₹51,590.33 crore so far this year, including ₹5,380.49 crore bought in October.
The rupee on Wednesday ended at 70.90, down 0.07% from the previous close.