31.10.13

Sensex @ 21k




The Sensex rose to an all-time record marking a stock market turnaround that was as dramatic as its plunge in August, on the back of return of overseas investors, a stronger rupee and likely narrowing of current account deficit, all of which followed emergency measures aimed at shoring up the currency and the US Federal Reserve postponing a decision on ending its stimulus programme. The Sensex rose 0.5% to end at a new high of 21,033.97, up from its year’s low of 17,905 in August. Beaten-down stocks such as L&T, SAIL and Maruti Suzuki have outperformed glamorous rivals such as Hindustan Unilever, ITC and TCS in the past one month as foreign investors cherry-picked stocks trading at low valuations. The Nifty rose 0.5% to 6,251.70. Foreign investors, the biggest drivers of change in the Indian market, have bought Rs.13,991 crore of shares in October so far, taking their purchases in the Indian market in 2013 to Rs.85,837 crore.
Bharat Forge, Tata Communications, Dr Reddy’s Labs all hit 52-week highs while SBI, Sesa Sterlite and Axis Bank fell.
Some experts said the momentum is also being driven by investor confidence that BJP will do well in next year's general elections.



Indian stocks were battered by the storm that engulfed emerging markets in May after Fed Chairman Ben Bernanke hinted at cutting back the pace of bond buying. The rupee plunged and stocks were whipsawed by headwinds in the form of sliding economic growth and policy paralysis caused by the UPA government’s scandals and seeming inability to make policy changes work.
Stocks of capital goods, engineering and metal companies were hammered while consumer goods and information technology stocks rose as investors sought a safe haven. But Fed’s move to postpone a decision on winding up its bond purchases in September and measures announced by new Reserve Bank of India governor Raghuram Rajan to stabilise the rupee soothed frayed nerves.
The resumption of buying by foreign institutional investors (FIIs) in September and October lifted stocks trading at cheap valuations, though poor earnings growth and subdued economic conditions have cast a question mark over the rally’s longevity. One stock fell for each that rose on the Sensex on Wednesday and some experts said the rally cannot be sustained.
The eventual withdrawal of its stimulus programme by Fed may not dent the rupee as measures have been put in place to help contain current account deficit, Rajan told analysts on Wednesday.
The companies comprising the Nifty index posted a 4.98% rise in net profit in 2012-13, the lowest in three years. This year’s numbers may be better but growth forecasts have been cut for the year and high interest costs may take a toll on earnings.
RBI raised repo rate by a quarter percentage point on Tuesday to rein in inflation and may do so again this year, economists said.
But the current stock market rally is more broadbased than the one in September, when the main beneficiaries were consumer goods and information technology stocks.

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