Sensex rides reforms wave

Bulls cheered Manmohan Singh governments fresh initiatives on financial sector reforms with another strong rally....

Bulls cheered Manmohan Singh governments fresh initiatives on financial sector reforms with another strong rally. Taking gains for the week to 9.2 per cent,the benchmark Sensex rallied 3.5 per cent on Friday as the government raised hopes for financial reforms. The 30-share BSE index ended up 3.47 per cent,or 494.67 points,at 14,744.92 points. The 50-share NSE index ended up 3.4 per cent at 4,374.95.

With this,the Sensex has recovered by 1,346 points in the last four sessions. It was biggest one-day percentage rise in seven weeks and the weekly gain was the best in nearly two months and the strongest performance among major Asian markets.

Bringing cheers to the market,finance secretary Ashok Chawla said the government would introduce seven bills in Parliament,including proposals for pension and banking reforms and efforts to raise the foreign investment limit in insurance companies. The Banking Regulation Amendment Bill,2005,and the State Bank of India Amendment Bill,2006,which were introduced by the government in the 14th Lok Sabha have lapsed.

On Friday,most world markets followed Wall Street higher as investors welcomed stronger results from US technology bellwethers IBM Corp. and Google Inc,as well as financial giant JPMorgan Chase amp; Co. This weeks corporate results have come as something of a relief to investors,who sent stocks lower earlier this month out of concern earnings would reveal the US economy in far worse shape than originally thought. ICICI Bank,Infosys Technologies and HDFC led the gains in India,lifting the Sensex after it dropped 9.4 per cent last week.

The revival of monsoon also added to the bullish fervour. A lot of god news is coming in. Monsoon rains which were weak are looking up,overseas markets are doing well,and the government is now talking reforms, Jayesh Shroff of SBI Mutual Fund said.

But there are still concerns about rich valuations and uncertainty surrounding the domestic economy and corporate earnings growth,but the momentum in overseas markets is spurring the benchmark higher.

Last week,the Sensex posted its biggest weekly fall in eight months,after the governments budget offered little in terms of bold economic and financial reforms,but set a huge deficit of 6.8 per cent of GDP,the highest in 16 years. A late start to monsoon rains,crucial to Indias economy,had also worried investors.

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Equities worldwide have rallied this week as strong results from firms like Goldman Sachs,JP Morgan,Intel and LG Electronics Inc,and encouraging data from China and Singapore signalled the turmoil in the global economy was abating. But after an 83 per cent jump from a 2009 low in early March,the BSE index now trades at 16.3 times one-year forward earnings,higher than benchmarks at other emerging markets. With agencies