The benchmark Sensex on Wednesday rallied to an all-time closing high of 21,033 points on sustained buying from overseas investors. Hopes that the US Federal Reserve will defer tapering its quantitative easing programme lifted equity markets the world over.
The Sensex has now risen 13.2% since Raghuram Rajan took over as the governor of India’s central bank on September 4, and is up 8.2% in the year to date. The rupee, meanwhile, has appreciated 9.6% against the greenback since the governor announced measures to shore up the currency. The rupee closed at 61.24 on Wednesday.
The surge in global indices boosted sentiment in the Indian markets on Wednesday. The Dow Jones had touched its all-time high of 15,680.35 points on Tuesday on expectations that the US Fed would continue with the stimulus. “Globally, things are much better now than they were a few months back and the Fed tapering seems to be off the table, which is good for emerging markets such as India,” Andrew Holland, CEO, Ambit Investment Advisors, said.
Foreign institutional investors (FIIs) bought a net $166 million of Indian equities on Wednesday, according to provisional data from stock exchanges, taking their month-to-date tally to about $2.6 billion. This was the 19th consecutive session of FII buying. FIIs have now purchased shares worth about $16.2 billion so far this year.
The Nifty added 30.8 points to close at 6,251 on Wednesday. The Sensex is now just 172 points away from the intra-day peak of 21,206.77 that it had scaled on January 10, 2008, and has gained 21% since hitting an intra-day yearly low of 17,448.71 on August 28.
On Tuesday, the Sensex had put on 1.7% or 358 points with the Reserve Bank of India tweaking policy along expected lines and injecting liquidity to the tune of R20,000 crore into the system. “Although the RBI governor’s tone seemed hawkish, he did a good job of injecting liquidity into the system and his statement saying that growth was a concern was viewed positively by the market,” said Holland.
The renewed buying augurs well for India, which is dependent on overseas inflows. Foreign brokerages had recently warned that any significant sell-off by overseas investors could bring the markets crashing down as FII ownership in Indian markets was at an eight-year high.
“The market has been driven by the stabilisation in the currency and flows from global investors. The results season has been