Key benchmark indices gained more than 2 per cent on Friday, hitting their highest levels in more than 14 months. The gains were led by financials, capital goods and index heavyweight Reliance Industries.
The government’s announcement of a reduction on taxes on overseas loans of local companies to 5 per cent from 20 per cent as well as a plan offering tax relief to retail equity investors, during trading hours, also boosted investor sentiment on D-Street.
Alongside the equity rally, the rupee too surged on Friday to its highest level in over four months after the government cut a tax for overseas borrowing by local companies, giving them access to cheaper funds. Forex traders expect the rupee to rise to 50.80-51 levels to the dollar in the near-term, which would mark a remarkable recovery for a currency that just in late June had hit a record low of 57.32 to the dollar.
Brokers are cautious in their view, saying that the rally was driven mainly by a potent mix of positive sentiment and liquidity. However, many foreign institutional investors think there is money to be made in the short-term.
Foreign institutional investors (FIIs) sold shares worth a net Rs 1.90 crore from the secondary equity market on Thursday, as per Sebi data. FIIs had made heavy purchases of Indian stocks recently. FIIs bought shares worth a net Rs 6,267.30 crore from secondary markets during three sessions from September 14-18, which is nearly 70 per cent of the Rs 9,323 crore of net purchases for the month so far.
“Ending the week at 52-week high on the back of a 2 per cent gain on Friday, Indian markets were the best-performing markets globally for the week. Shares in the beaten down sectors of capital goods, infrastructure, power were the leaders, while stocks in the FMCG, pharma and IT were underperformers, after their strong run-up in recent weeks,” Dipen Shah of Kotak Securities said.
The market opened on a firm note on Friday and extended initial gains to hit fresh intraday high in morning trade. It pared after striking fresh intraday highs in afternoon trade but the market regained strength in mid-afternoon trade and held firm in late trade.
The popular Sensex at BSE jumped 403.58 points or 2.2 per cent to 18,752.83, its highest closing level from July 25, 2011. The index jumped 517.62 points at the day’s high in early afternoon trade and rose 61.95 points at the day’s low at the onset of the trading session.
The 50-unit S&P CNX Nifty at NSE jumped 136.90 points or 2.46 per cent to 5,691.15, its highest closing level since July 7, 2011. The index hit a high of 5,720 and a low of 5,575.45 in intraday trade.
From broader markets, the BSE Mid-Cap index rose 1.61 per cent and the BSE Small-Cap index gained 1.46 per cent. Both these indices underperformed the Sensex.
The market breadth, indicating the overall health of the market, was strong, with as many as 1,815 shares rising on BSE and 1,102 shares falling, while a total of 123 shares remained static. BSE clocked a turnover of Rs 2,989 crore, higher than Rs 2,042 crore on Thursday.