Overjoyed stock markets soar to 19-month high
THE end of the political standoff over FDI in multi-brand retail was cheered by the stock markets which closed at a 19-month high Thursday. The rupee too rose 61 paisa against the dollar as foreign institutional investors bought more equity in a single day than they had at any time in November.
The uptick was aided by an investment report from Goldman Sachs which upgraded Indian stocks to 'overweight' from 'market-weight'. An overweight classification for a category or country means the shares are worth stocking up.
The Indian indices were among the best performers in Asia-Pacific even though all markets rose after a senior US lawmaker said the 'fiscal cliff' might be resolved.
The Bombay Stock Exchange benchmark Sensex Thursday closed at a 19-month high of 19,170.91. This is a gain of 328 points or 1.75 per cent for the second straight day, while the broader National Stock Exchange index Nifty closed 97.55 points or 1.7 per cent higher at 5,825.
The release of the second quarter GDP data on Friday is expected to be key data for the markets. Manish Sonthalia, vice president and fund manager at Motilal Oswal AMC-PMS, said the 19,000 figure was coming. "It has come sooner than what most people expected. Nothing to get too excited about. We will see much higher levels in the months to come," he said.
Investors are hopeful that the domestic economy will improve and key legislative bills pushed through soon. The government has listed 25 bills for consideration and passing by the house and another 10 for introduction during the winter session, including the PDRFA bill, insurance laws (amendment) bill and the companies bill.
However, GDP numbers on Friday could show growth has moderated to a decade's low. Finance minister P Chidambaram has estimated it at 5.5 to 6 per cent in the current fiscal. The Goldman Sachs report notes that the Indian economy is likely to grow by 6.5 per cent in 2013, driven by favourable external demand outlook and push for domestic structural reforms.