CAD fuels Sensex; Nifty at record high

Key benchmark indices on Thursday surged after data released by the Reserve Bank of India (RBI) after trading hours the previous day showed that the country's Current Account Deficit (CAD) declined sharply in the third quarter of 2013-2014.

So, investors in D-Street cheered the sharp decline in the CAD, which stands at a 4-year low as exports picked up and gold imports reduced.

That apart, sustained buying by foreign funds in the past few sessions fuelled the markets to all-time highs on Thursday. Foreign institutional investors (FIIs) were net buyers of local stocks worth Rs 193.30 crore (cash segment) on Wednesday, as per SEBI's provisional data. Gains in Asian and European stocks also boosted sentiment on the domestic bourses.

The market breadth, indicating the overall health of the market, was strong. With the exception of BSE Healthcare index, all the other sectoral indices on BSE were in the green.

The premium indices on both the BSE and NSE hit record highs on intraday as well as closing levels. The BSE Small-Cap and Mid-Cap indices rose more than 1 per cent each, thereby outperforming the Sensex.

Brokerages attributed the current rally to increased participation from retail investors and an optimism that is generally witnessed ahead of the general elections. A change in the current government is largely viewed positively by brokerages.

Motilal Oswal, CMD, Motilal Oswal Financial Services said, "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 pre-election rally and that is what is reflected in the levels. We feel strong political mandate would result in increasing level of optimism, and new levels for the market."

In short, it was a broadbased rally on Thursday which saw BSE mid-cap and small-cap indices (up 1.2 per cent) outperforming the benchmark Sensex (up 1.1 per cent) marginally.

The rupee too strengthened to its highest in nearly three months in afternoon trades on the back of on sustained selling of dollar after a sharp decline in Current Account Deficit (CAD) in the third quarter.  It was last seen trading at Rs 61.27 compared with the previous close of Rs 61.76 per dollar. The rupee was last seen near these levels on December 11 at Rs 61.25.

Among blue-chips, ICICI Bank, Reliance, ONGC, Coal India, NTPC, L&T and HDFC twins added between 1-3 percent and were the top gainers on Thursday.

Further, the BSE Sensex jumped 237.01 points or 1.11 per cent to settle at 21,513.87, a record closing high. The index jumped 248.28 points at the day's high in late trade and rose 53.02 points at the day's low in early trade.

The CNX Nifty at NSE garnered 72.50 points or 1.15 per cent to settle at 6,601.15, a record closing high. The index hit a high of 6,406.60 in intraday trade, just a few points away from its record high of 6,415.25 which it had struck on December 9, 2013. The index hit a low of 6,339.70 in intraday trade.

From broader markets, the BSE Mid-Cap index garnered 80.49 points or 1.21 per cent to settle at 6,708, while the BSE Small-Cap index garnered 80.02 points or 1.22 per cent to settle at 6,626.46. Both indices outperformed the Sensex.

The market breadth, indicating overall health of the market, was strong with 1,735 shares gained and 1,108 scrips fell, while a total of 149 stocks were unchanged. The total turnover on BSE amounted to Rs 2680 crore, which is higher than Rs 2354.96 crore on Wednesday.

Meanwhile during the day at bourses abroad, European stocks edged higher as investors awaited the European Central Bank's interest-rate decision and US data on jobless claims. Key benchmark indices in France, Germany and UK were up 0.07 to 0.57 per cent.