After conquering mount 19K a day before, Indian equities extended gains on Friday amid strong global cues and weak GDP data, which raised hopes of a cut in key policy rates in the coming weeks. In doing so, the benchmark indices capped a spectacular week, with the BSE Sensex crossing the psychological 19,000-mark and logging stellar gains of 4.5% to touch a 19-month high.
Gross domestic product (GDP) slid to 5.3% for the quarter ended September compared with 5.5% in the previous quarter and 6.7% in corresponding quarter last fiscal. But the market chose to see the positive side of of these numbers, hoping that the weak GDP data would force RBI's hand to bring down interest rates during its next policy review. “Despite their stance on inflation, the RBI is likely to come under immense pressure on easing rates in the coming quarters. We maintain expectations of another 50 bps easing on the repo by March 2013, and possibly more going forward,” said Gautam Trivedi, MD & head of equities, Religare Capital Markets.
The 30-share BSE Sensex ended Friday with gains of 169 points or 0.88% to 19,339, while the broader 50-share Nifty added 54.8 points or 0.94% to close at 5,879. On Friday, FIIs bought shares worth R1,611 crore, while domestic institutional investors sold shares worth R798 crore, BSE data show.
FIIs have purchased stocks worth $2billion in November, taking the year-to-date purchases to $20.07 billion. The benchmark BSE Sensex is up about 25% in the year to date and is among the best performing among emerging markets on the back of foreign inflows. Market participants expect the FII floodgates to remain open if the reform measures go through.
The mood was upbeat throughout the week. On Tuesday, ratings agency Moody's kept India's credit outlook as stable, saying the country had a high savings rate and its private sector remained competitive. On Thursday, foreign brokerage Goldman Sachs upgraded Indian stocks to 'overweight' from 'market-weight', setting a December 2013 target of 6,600 points for the 50-share Nifty index, which is about a 12.2% upside from the index's current levels. The brokerage cited growth recovery and inflation moderation for its revised target.
Earlier this week, brokerage Morgan Stanley set a probability-weighted target of 23,069 for the BSE Sensex for December 2013, implying a 26% upside, citing a steady recovery in broad earnings growth.
Overseas newsflow was positive as well. Greece's