MUMBAI The BSE Sensex and the Nifty rose to record highs on Thursday after cabinet approval for a higher foreign direct investment limit in insurance and a rejig in foreign debt limits reinforced optimism about the government's reform agenda.
The Sensex rose to a life high of 26,292.66, surpassing its previous record high of 26,190.44 hit on July 8, while the Nifty hit a new peak for a second straight session at 7,835.65.
Gains were also underpinned by higher emerging equities which hovered near 17-month highs after a private survey showed surprisingly strong Chinese manufacturing data, boosting blue-chips such as HDFC Bank (HDBK.NS).
The Nifty rose 5.1 percent in the last eight consecutive sessions of gains compared to a 2 percent rise in the MSCI Asia Pacific Ex Japan index in the same period.
Overseas investors bought Indian shares worth 6.52 billion rupees ($108.81 million) on Wednesday, totalling inflows of $723.80 million over six consecutive days of buying, and nearly $12 billion in 2014 so far, exchange and regulatory data showed.
"Foreign investor interest is already high and the government is doing a lot of reforms to revive the economy. Monsoon progress and RBI (Reserve Bank of India) review in August are next on radar," said Nirakar Pradhan, chief investment officer at Future Generali India Life Insurance.
The Sensex rose 0.48 percent, or 124.52 points, to end at 26,271.85, while the Nifty gained 0.45 percent, or 34.85 points, to end at 7,830.60.
Insurers gained after the cabinet approved raising the foreign direct investment (FDI) limit in the insurance sector to 49 percent from 26 percent. The hike now needs to be approved by parliament.
Reliance Capital Ltd (RLCP.NS) gained 4.1 percent, while Max India Ltd (MAXI.NS) ended up 0.7 percent.
Expectations of reforms were reinforced after India on Wednesday allowed foreign fund managers to hold more government bonds by tweaking the amount that foreign institutional investors can buy while keeping the overall limit in debt markets intact.
Blue-chips rose tracking higher Asian shares. HDFC Bank rose 0.7 percent, while ITC (ITC.NS) ended higher 0.8 percent.
Indian metal companies surged after a surprisingly strong reading on Chinese manufacturing.
Tata Steel Ltd (TISC.NS) rose 2.4 percent and JSW Steel Ltd (JSTL.NS) ended higher 3 percent.
Hindalco Industries (HALC.NS) rose 2.2 percent, while National Aluminium Co Ltd (NALU.NS) advanced 2.4 percent.
Bank of Baroda (BOB.NS) rose 3.4 percent, adding to Wednesday's 2.6 percent gain after the Reserve Bank of India removed the stock from its caution list, making it eligible to be bought by foreign investors in the primary and secondary markets.
However, Ipca Laboratories Ltd (IPCA.NS) slumped 13.3 percent after the company said it has voluntarily halted shipments to the United States from one of its drug ingredient manufacturing plants after the U.S. Food and Drug Administration.
Cairn India (CAIL.NS) shares slumped 6.7 percent on the company's $1.25 billion loan facility to parent group Vedanta Group, of which $800 million was disbursed in the first quarter, Jefferies said in a note.
(Editing by Subhranshu Sahu)