Reforms ride takes markets to new high

The stock market ended the week with a bang rising over 400 points to close at its highest level in 2012. The rise came even as the government eased tax norms for firms seeking foreign funding and made official a scheme for tax breaks for retail investors in the equity market.

The Sensex, BSE 30 stock benchmark index which is the barometer the market, was up 403.58 points or 2.2% to close at 18752.83, near a 14 month high.

The National Stock Exchange’s Nifty closed at 5691.15.
Piyush Garg, CIO at ICICI Securities, said government action as well as recent easing by central banks around the world have helped push up markets.

“Policy action has caused a serious sentiment change in the market. Global liquidity too has helped with Indian markets moving higher even as global markets have closed at multi-year highs,” he said.

Central banks in Europe, America and Japan have all injected greater liquidity into the market to ease growth concerns in September.

Navneet Munot, chief investment officer at SBI Mutual Fund, says that there seems to be renewed momentum on reforms front with finance ministry implementing some of  the important budget proposals.

“While RGESS would help generate interest in equity markets from retail investors, lower withholding tax would help reduce borrowing cost as lenders may extend lower interest rates pricing in lower tax on interest income. A combination of global liquidity, end of policy paralysis, light market positioning in the backdrop of extreme negativity has led to sharp rise in markets. Trend is likely to remain upwards in the near term,” he said.

Infrastructure companies reacted positively to easier access to foreign capital. The BSE’s Power and Capital Goods indices which mark the performance of companies in the sectors were the best performers on Friday.

Power and capital goods indices were up 4.35% and 4.12%, respectively.

Metal and banking stocks too were up over 4% on Friday, with the latter up on hopes of power reforms easing issues over bad loans to the sector.

Twenty seven out of the 30 stocks on the Sensex ended with gains.

There were nearly two gainers for every loser in the broader market. A total of 1800 stocks ended with gains while 1100 declined on Friday on the BSE.

Foreign institutional investors were net buyers by Rs2,327.82 crore, according to provisional exchange figures. They have been net buyers by Rs6,260.60 crores excluding the provisional since the government set off reforms with a reduction in fuel subsidies last Thursday.

Meanwhile, domestic institutions were net sellers by Rs1,127.28 crore on Friday according to Friday’s provisional data and Rs1,761.2 crore so far in September as per final figures from the Securities and Exchange Board of India.

Shubham Agarwal, associate vice-president and senior technical equities analyst, Motilal Oswal Securities suggests more some more upside maybe ahead.

“Nifty moved higher to achieve the short term target of 5700. Elliot Wave Count suggests a maximum upside up to 5930,” he said.