BSE Sensex hits life high of 21,294; caution prevails

MUMBAI Fri Nov 1, 2013 4:40pm IST

A road sign stands next to the Bombay Stock Exchange building (R), August 3, 2005. REUTERS/Arko Datta/Files

A road sign stands next to the Bombay Stock Exchange building (R), August 3, 2005.

Credit: Reuters/Arko Datta/Files

Related Topics

Stocks

   

MUMBAI (Reuters) - The Sensex surged to a record on Friday as blue chips rallied on the back of strong foreign buying, in a remarkable turnaround from two months earlier, when the rupee hit record lows and threatened a crisis of confidence.

The Sensex has been propelled by foreign inflows of around $3.5 billion since the Federal Reserve unexpectedly delayed tapering of its monetary stimulus.

The foreign buying comes despite mixed signals in an economy growing at its slowest in a decade, with analysts seeing new challenges ahead as the central bank raises interest rates to curb stubbornly high inflation.

That has made some investors cautious about whether a rally that has sent the index up 21.5 percent since a yearly low on August 28. can be sustained.

"I am not too pleased with the way fundamentals are shaping up. This new high is driven by only a handful of stocks which are hopelessly expensive, despite fundamentals," said fund manager Phani Sekhar at Angel Broking.

"The liquidity rush is making people accumulate stocks. If fundamentals don't improve or liquidity tapers, then this rally won't have many legs."

The Sensex rose as high as 21,293.88 points, a gain of 0.6 percent for the day, surpassing the previous record of 21,206.77 points on January 10, 2008. It ended Friday up 0.2 percent.

Despite the record high, the Sensex remains Asia's fourth-worst performer this year in dollar terms among the exchanges tracked by Thomson Reuters, with a fall of 2.6 percent.

The returns have been hurt by a weak rupee, which hit a record low of 68.85 in late August, that had sparked concerns about a currency crisis in the country.

Those concerns have subsided, thanks to the delay in the Fed tapering and steps to steady the rupee taken by India's new central bank governor Raghuram Rajan.

Still, challenges to the broader economy remain. Manufacturing activity contracted for a third straight month in October, data on Friday showed, for example.

Signs of weakness are keeping the economic outlook uncertain even as other data show signs of improvement, including a report showing India's infrastructure sector output rising at its fastest in a year.

The World Bank last month slashed its growth forecast for Asia's third-largest economy to 4.7 percent in the year ending March, below the decade low of 5 percent in the previous fiscal.

The Reserve Bank of India also raised interest rates by a quarter percentage point for a second consecutive month in October, to fight accelerating inflation.

Indian shares are expensive compared to regional peers, trading at about 14.4 times trailing 12-month earnings compared to 10.6 times for Asian emerging markets, Credit Suisse said.

Yet blue chips have been gaining. The Nifty rose 0.1 percent, also within sight of a record high set on January 8, 2008.

State-owned banks gained for a second consecutive session on Friday on hopes of stabilising asset quality, sending State Bank of India Ltd (SBI.NS) up 5 percent.

Among other lenders, Bank of India (BOI.NS) rose 5.5 percent, while Bank of Baroda (BOB.NS) surged 4.5 percent.

Infrastructure Development Finance Co Ltd (IDFC.NS) shares jumped 6.8 percent after its September-quarter consolidated net profit beat some analyst expectations.

Hero MotoCorp Ltd (HROM.NS) gained 1.1 percent after the company said October sales rose 18.2 percent.

Dr.Reddy's Laboratories Ltd (REDY.NS) gained 0.6 percent after its September-quarter consolidated net rose 69 percent to 6.90 billion rupees.

Shares of Titan Co Ltd (TITN.NS) fell 2.1 percent after its September-quarter net profit missed some analyst estimates.

(Editing by Clarence Fernandez)

FILED UNDER:

Economic Pulse

REUTERS SHOWCASE

Gold Imports

Gold Imports

India eases gold import rule in surprise move.  Article 

Indians in Iraq

Indians in Iraq

India says no contact with 39 men held by Islamic State in Iraq.  Full Article 

Sahara Issue

Sahara Issue

Sahara looks to raise $650 million loan to fund bail.  Full Article 

Bhopal Tragedy

Bhopal Tragedy

Bhopal's toxic legacy lives on, 30 years after industrial disaster.  Full Article 

Banking Sector

Banking Sector

After record deal, more India bank takeovers on cards  Full Article 

Islamic Fund

Islamic Fund

India gets new Islamic equity fund but debt market still off-limits  Full Article 

Cricket Tragedy

Cricket Tragedy

Clarke breaks down giving heartfelt Hughes tribute  Full Article 

Nigeria Violence

Nigeria Violence

Bombs, gunfire kill 81 at crowded mosque in Nigeria's Kano  Full Article 

Movie Review

Movie Review

D’Silva's “Ungli” just skims the surface  Full Article | Related Story 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage