Mumbai, Sept. 12: The Sensex soared to a seven-month high as it clambered above 18,000 once again, buoyed by a global cue — a German constitutional court’s approval for the Eurozone’s bailout fund — as investors shrugged off depressing news that factories at home had stuttered once again in July.
The stock surge showed that investors were more interested in market-moving news overseas than statistical blips at home. In any case, the market has been losing faith in the government’s number crunchers after a spate of boo-boos in the past. That could explain why the weak industrial output growth in July – down to 0.1 per cent against a market consensus of 0.5 per cent – failed to take the shine off stocks.
The market pundits believe that equities could remain in the positive territory amid expectations of another quantitative easing – dubbed QE3 – by the US Federal Reserve tomorrow. The Fed began its two-day deliberations on Wednesday. However, this rally will sustain only if the Union government, long accused of policy indecision, jump starts reforms.
Incidentally, foreign brokerage HSBC today downgraded Indian stocks to underweight from neutral stating that the debt crisis in Europe would affect equities. It maintained that if no concrete measures were taken by the Centre, it could affect the country’s investment climate.
The 30-share BSE Sensex started the day strong at 17916.13 but yielded most of those gains by noon. However, news from Europe sparked a rally in Asian and European shares and boosted stock values here as well. Subsequently, the index touched an intra-day peak of 18012.89 before closing at 18000.03, a gain of 147.08 points or 0.82 per cent.
Likewise, the broad-based National Stock Exchange index Nifty closed 41 points, or 0.76 per cent higher at 5431.
Asian benchmark indices in China, Indonesia, Singapore, Japan, Taiwan, South Korea and Hong Kong ended higher by 0.28 per cent to 1.73 per cent. European stock markets also turned positive in the early trade today. Key benchmark indices in France, UK and Germany were up by between 0.20 per cent to 0.89 per cent.
Around 21 stocks in the Sensex pack closed with gains. Tata Motors led the gainers with a smart 5 per cent rally on reports that Jaguar Land Rover planned to release a new Range Rover model next month.
Aviation stocks also witnessed brisk activity after union minister Ajit Singh expressed optimism that foreign direct investment would be allowed in the sector. Shares of Kingfisher Airlines, which have been in the news for all the wrong reasons, spurted nearly 8 per cent to Rs 9.51. Jet Airways also jumped by over 5 per cent and SpiceJet by a little over 7 per cent.
Market circles said that the disappointing IIP number did not have any impact on stocks since the Reserve Bank of India (RBI) is expected to stand pat on interest rates at its mid-quarter monetary policy review on Monday. It is expected to flag its concerns over inflation again.
Indian equities have been strong performers this year, buoyed by flows from foreign Institutional Investors (FIIs). Analysts however, caution that these could turn negative if there are adverse developments like a rating downgrade or continued vacillation on the reform process. Provisional data from stock exchanges showed foreign investors had bought shares worth Rs 423.59 crore on Tuesday.