Sensex Hits Record High on Continued Reform Push; IT Stocks Rally

Indian stock markets rallied sharply on Thursday with the Sensex rising over 250 points to an all-time high of 27,358.85. The Nifty advanced over 75 points and neared its record high of 8,180.20.

Continued reform push by the government has aided sentiments, traders say. On Wednesday, the government relaxed rules for foreign direct investment (FDI) in construction development.

The new rules make it easier for foreign companies to invest in India and many projects will now qualify for FDI through automatic route (no FIPB clearance will be required), analysts say.

Shares in realty and construction companies also rallied with DLF advancing 3.6 per cent.

A lower-than-expected increase in wheat support prices also aided sentiment, analysts say. Lower increase in minimum support prices bodes well for the food price inflation outlook and thus should help lower headline inflation in the coming quarters, Nomura says.

The rally in Indian markets has also been fuelled by a sharp drop in global crude prices, which have hit a four-year low. The fall in Brent means significant savings for the Indian economy, which is likely to narrow both the current account deficit and the fiscal deficit.

Thursday’s big push came from IT stocks, which rose sharply after the US Federal Reserve overnight expressed optimism about economic recovery. India’s IT sector is heavily dependent on the US economy for growth.

The IT sub-index led Thursday’s rally, rising 2.6 per cent as compared to the 0.9 per cent rise in the broader Sensex. HCL Tech was the top Nifty gainer, up 4.7 per cent. Tech Mahindra advanced 4.3 per cent.

The Fed also ended its stimulus programme, called QE3, but maintained the stance of “low rates for a considerable period of time”. Analysts say this is positive for equities and rupee, which have gained from the huge overseas funds.

As of 1.22 p.m., the Sensex traded 205 points higher at 27,302.74, while the Nifty was up 63 points at 8,153.

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