Indian equities saw the biggest weekly gain in three weeks on strong buying by foreign institutional investors (FIIs),better- than- expected corporate earnings and stability in global equity markets.
Gaining for the fourth consecutive session on Friday,the Sensex advanced 32.29 points or 0.15% from its previous close to end at 21,196.81 and the Nifty gained 8.05 points or 0.13% to end at 6,307.20. The 30-share Sensex jumped nearly 2.5% whereas the 50-share Nifty moved up by 2.7% during the week that saw benchmark indices move back to levels seen three years ago.
The Sensex climbed to a new high of 21,293.88 and the Nifty closed above 6,300 for the first time since November 2010.
Provisional data from stock exchanges showed FIIs net purchased $30.24 million worth of Indian shares on Friday,taking the buying spree to 21 straight sessions.
On Thursday,overseas funds net bought $290 million of Indian equities the biggest net inflow since September 20,official data showed.
After withdrawing $3.61 billion from Indian equities during June to August,FIIs have bought nearly $5 billion since the beginning of September. For the year,foreigners have bought over $16 billion the second highest among 10 Asian markets tracked by Bloomberg.
The gains were largely led by value buying in banking and interest rate sensitive stocks after the Reserve Bank of India (RBI) introduced liquidity enhancing measures for banks,while raising key policy rate that broadly matched market expectations.
Bank Nifty jumped 6.7% this week,while BSE Realty,BSE Capital Goods,BSE Consumer Durables,BSE Metals,and BSE Auto ended up 3-6%.
ICICI Bank was the top gainer this week,rising almost 11% to a near four-month high followed by State Bank of India (9.4%) that also rose to its highest level since July 15. Maruti Suzuki (8.6%),Mahindra & Mahindra (6.6%) and Bharti Airtel (6.6%) completed the list of top five gainers.
On the earnings front,profits at 16 of 19 Sensex companies that have reported their September quarter results matched or exceeded analysts’ expectations,according to data compiled by Bloomberg. About 47% of the 30 companies in the index missed forecasts in the previous quarter.
Broader markets outperformed the benchmarks yet again. Data showed,BSE Mid-cap and Small-cap indices rose 3.5% and 1.95%,respectively,during the week.
Stability and positive sentiment in global markets also lent support to Indian equities,analysts said. Major Asian indices like Nikkei 225,Hang Seng,Shanghai Composite,Taiwan TAIEX,and Kospi all ended up in the range of 0.5-3.5%. Major European and American indices were trading up 0.5-1% at the time of going to print.
Analysts,however,remain cautious as the rally may falter. Key events elections,likelihood of tapering of quantitative easing by the US Federal Reserve and volatility in the rupee could dampen investor sentiment.
The up-move is more of a relief rally. There is not enough cause for the markets to rejoice and Indian equities may not be able to sustain given the inflation-growth-interest rate scenario, said UR Bhat,managing director,Dalton Capital Advisors.
Bhat added that taper talk by the US Fed is crucial and any change in the commentary could prompt FIIs to start considering their investments and take money off the table,after having invested billions in the last three months.