Sensex hits a 20-month high

A Senate deal to avert the looming US budget crisis, popularly fiscal cliff, pushed sensex up 154 points at 19,581 on the first day of 2013, after taking the index to a 20-month high in intra-day trades. Day’s gains were also helped adequately by strong FII buying and expectations that the RBI will cut key policy rates in its review meeting on January 29. As a result, the stocks of companies which are sensitive to interest rates rallied. The day’s session added Rs 65,000 crore to investors’ wealth with BSE’s market capitalization now at Rs 69.8 lakh crore, the highest level seen since end-April 2011.
The resultant rally in the Indian market took the sensex to an intra-day high at 19,623 but closed a tad off that mark.
Market analysts and economists said that with the US Senate’s agreement on the fiscal cliff, which would not allow for a drastic spending cut and a rise in taxes across the board, would now reduce the chances of the world’s biggest economy slipping back into recession.
For India, the high point is that less uncertainty in the US market means FIIs would be more comfortable to invest in India, the economist said.
The cliff deal also helped strengthen the rupee against the dollar. The Indian currency closed 31 paise stronger at 54.69 to a dollar, as the inflows by foreign players also helped the currency’s appreciation.