Key benchmark indices on Tuesday galloped as the rupee extended recent recovery against the dollar on receding geopolitical risks from Syria, with the benchmark BSE index Sensex breaching the psycological 20,000 mark during the day.
The BSE Sensex was up 727.04 points or 3.77 percent to close at 19,997.10, its highest closing level since July 24, 2013. The CNX Nifty gained 216.35 points or 3.81 per cent to settle at 5,896.75, its highest closing level since 25 July 2013.
Experts pointed out that upbeat trade data that revealed India's trade deficit for the month of August narrowing down to $10.9 billion from $12.26 billion in July, also contributed to the rally. The deficit narrowed on the back of improving exports and declining imports, and was down 11 per cent.
Given nearly 15 per cent drop in rupee so far in the year 2013, there are a few data points which indicate that the macroeconomic slowdown and other headwinds may be behind India. "The one single data point that one should watch out for over the next 2-3 months is trade deficit. It would be interesting to see the trade deficit stay at current levels," MD & HoR, BNP Paribas Manishi Raychaudhuri said.
Hopes of further measures, according to analysts, from new RBI Chief Raghuram Rajan will keep the momentum intact in the rupee. "The currency appreciation that we have seen since last week, is essentially due to certain announcements after the new RBI governor took charge. However, the fundamental factors behind rupee fall continue to signal a weakening trend," said Dhananjay Sinha, Co- Head, Institutional Research- Economist & Strategist at Emkay Global Financial Services LtdBSE 4.99 per cent.
As for external factors, easing concerns over Syria and fall in crude oil prices markets across the globe including India to post a smart rally. Asian stocks rose to three-month highs on receding fears of a US military strike against Syria which kept oil prices under pressure.
