Dalal Street gave a thumbs up to the sharp decline in India’s current account deficit during the December quarter and sustained buying by foreign funds over the past few sessions.
With CAD at a four-year low of 0.9 per cent as exports picked up and gold imports reduced, the BSE Sensex rallied to a new intra-day high of 21,525.14, before ending at a record closing high of 21,513.87, a gain 237.01 points or 1.11 per cent.
The Sensex rally, which surpassed its previous record closing of 21,373.66 set on January 23, 2014, came a day after the Election Commission announced the schedule for the Lok Sabha elections. On the National Stock Exchange, the NSE 50-issue CNX Nifty also closed at an all-time high of 6,401.15, revealing a rise of 72.50 points or 1.15 per cent.
However, it failed to breach its intra-day all-time peak of 6,415.25 registered on December 9, 2013. The Nifty’s previous closing high of 6,363.90 was made on December 9, 2013.
The market is hopeful that the sharp decline in CAD would boost the rupee and FII inflows. “The market is riding on the optimism that a shrinking CAD will bolster rupee and bring in more foreign investors. Markets are also driven by the belief the elections will throw up a strong coalition at the Centre,” said BSE dealer Pawan Dharnidharka.
Motilal Oswal, CMD, Motilal Oswal Financial Services, said, “The market has hit a new high on the basis of strong FII flows as well as increasing retail participation. Normally, it is seen that there is a pre-election rally and that is what is reflected in the current levels. We feel strong political mandate would result into increasing level of optimism and hence new levels for the market.” FIIs bought shares worth $119.46 million on Wednesday, extending their buying streak to a 15 consecutive day for a net of about $950 billion.
Although the economy remained sluggish with GDP growing at just 4.7 per cent the third quarter, the silver lining has been the shrinking current account deficit, which came in at 0.9 per cent of GDP in the third quarter. “While economic/business activity seems only moderate, corporates are increasingly ‘waiting for the elections’, and political pundits are making more aggressive election calls. For now, it’s elections over earnings,” investment firm Citi said.
Gaurang Shah, assistant vice president, Geojit BNP Paribas Financial Services, said the uptrend continued in the markets with all sectorial indices contributing to higher levels on Sensex and Nifty. Investor sentiment overall has improved as the standoff between Russia and the West over Ukraine continued to ease. “The overhang of tension between Russia and Ukraine has taken a back seat for now and the global markets have reacted positively along with our markets,” Shah said.
The Sensex has garnered 567.22 points or 2.7 per cent in 3 trading sessions and 1,000 points, or 4.87 per cent in this month so far. From a 52-week low of 17,448.71 on August 28, 2013, the Sensex has risen 23.29 per cent.