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Magic market moment

Mumbai, March 6: The Sensex surged to a life-time high of 21525.14 as foreign investors scrambled to scoop up stocks, buoyed by hopes that the worst may be over for the Indian economy and a new reform-minded government will soon be in place after next month’s general elections.

The bellwether index smashed its previous record of 21483.74 that it set on December 9 last year.

The immediate trigger for the rally was the sharp fall in the country’s current account deficit (CAD), which tumbled to a four-year low at $4.2 billion in the third quarter ended December 31, or 0.9 per cent of the GDP, on the back of a rise in exports and fall in gold imports.

The strong CAD number helped the rupee surge 64 paise against the dollar to close trading at an almost three-month high of 61.11.

The rally also defied expectations that foreign investors would grow more cautious as the Federal Reserve continues to withdraw its monetary stimulus and ahead of the general elections.

The 30-share BSE Sensex closed at a new high of 21513.87, recording a gain of 237.01 points, or 1.11 per cent.

On the National Stock Exchange, the CNX Nifty closed at an all-time high of 6401.15, a rise of 72.50 points, or 1.15 per cent. However, it failed to breach its intra-day all-time peak of 6415.25 registered on December 9 last year. The Nifty’s previous closing high of 6363.90 was also made on the same day last year.

The word on the Street was that the shrinking CAD would bolster the rupee and attract overseas inflows.

Significantly, the foreign institutional investors (FIIs) continue to show interest in domestic equities even though the US Federal Reserve has started tapering its bond purchases. In fact, provisional data available from the stock exchanges show that the foreign investors made net purchases worth Rs 1,273 crore today.

“Many investors also seem to be enthused from the opinion polls which indicate that the NDA could form the next government,” said an analyst with a foreign brokerage.

He added that the bourses were in the middle of a pre-election rally and, if the current trend continues, the Sensex could surpass the 22000-levels in the next few days.

The BSE 30-share Sensex resumed higher at 21336.32 and remained in positive terrain throughout the day. It touched a new intra-day high 21525.14, before ending at 21513.87. The index, which has gained more than 567 points in three days, thus breached its previous record closing of 21373.66 set on January 23.

“The Nifty has its next resistance level in the region of 6600. In the past, we have observed that whenever the market crosses new highs it rallies by at least 5 per cent above it,” said Shrikant Chouhan, head of technical research at Kotak Securities.

Blue chips were the main drivers of the rally. ICICI Bank gained 3.1 per cent and Reliance Industries rose 1.9 per cent.

The rally was reasonably widespread with the BSE mid-cap index climbing 1.21 per cent and the small-cap index going up 1.22 per cent.

Continued fund inflows from FIIs and persistent dollar selling by exporters contributed to the rupee’s rise.

On the inter-bank foreign exchange market, the domestic unit commenced strong at 61.51 from the previous close of 61.75. It immediately touched a low of 61.54. However, it rebounded to a high of 61.10 in line with local equities. It was the biggest daily gain in the rupee’s value since November 18 last year when the currency had hardened by 70 paise.

 
 
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