19.1.13

Sensex tops 20k



Benchmark indices hit a two-year high on Friday as optimism over a partial decontrol of diesel prices spilled over from the previous trading session.
The Sensex, which closed up 0.38% at 20039.4, ended above the psychological 20000 mark for the first time since January 6, 2011. The Nifty also hit a two-year high of 6064.4, closing up 0.42%.
FIIs purchased Rs.1,166 crore worth of shares in the local market, one of the main reasons for the 68- paise rally in the rupee to a near three-month high of 53.71. A stronger rupee eased gold prices, which declined in Mumbai by Rs.105 per 10 gms to close at Rs.30,445, excluding VAT. WTI crude traded up 0.8% at $112 a barrel.
The Sensex has gained 8.5% since mid-September last year, after the government initiated a slew or reforms which included raising diesel prices by Rs.5 a litre, allowing foreign investment in multi-brand retail and permitting international airline companies to buy up to 49% of a local airline’s equity capital. These reforms propelled FII flows into the Indian markets last year which, at $24.4 billion, were the second highest since 2010 and caused the Sensex to rally by 26%.
Market experts like Nirmal Jain, chairman, IIFL, expect the Sensex to rise by 18-20% this year on a continued reform push and FII inflows which so far this year (January) stood at $2.4 billion.
The government’s decision allowing oil marketing companies to gradually raise diesel prices every month boosted sentiment as the move is expected to not only reduce oil under-recoveries by state-run upstream and downstream oil companies but also to lessen the government’s fiscal burden.
The under-recovery on diesel alone was Rs.52,711 crore in Apr-Sept ’12 and is likely to touch Rs.95,000 crore for the full fiscal year 2013 — a 17% jump over last year and possibly single-handedly causing a fiscal deficit of 0.9-1% of GDP.

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