Stocks zoom on IMF growth forecast, hope of stable govt

Tags: News
The BSE Sensex rose to a record high on Wednesday on a better economic growth forecast by the International Monetary Fund (IMF) and improved sentiments on the prospect of a stable government at the Centre after elections.

The index touched a new high of 22,740 in intra-day trade before closing at 22,702, up 1.61 per cent or 358.89 points, while Nifty added 1.51 per cent, or 101.15 points, to close at 6,796.20. The gains also tracked some other key Asian markets.

Sensex is up 7.38 per cent the year, driven mainly by inflows from foreign institutional investors, who have pumped $4.46 billion into domestic equities so far this year.

On Wednesday, FIIs were net buyers of equities worth Rs 1,043.86 crore, while domestic institutional investors sold stocks net of Rs 463.78 crore, provisional data on the stock exchanges showed.

The bankex (up 3.45 per cent) led the gainers on BSE, followed by the metal index (2.26 per cent) and healthcare index (2.21 per cent). Sun Pharma surged 7.12 per cent, its biggest single-day percentage gain since May 2009. This was in addition to its 2.9 per cent rise on Monday. Other major gainers in the Sensex pack were Axis Bank (4.4 per cent), Tata Motors (4.4 per cent), ICICI Bank (4.2 per cent) and Hindalco (4 per cent).

Going against the wind, IT majors Infosys, TCS and Wipro shed 1.16 per cent, 0.72 per cent and 0.49 per cent, respectively, while Oil and Natural Gas (ONGC) slid 0.95 per cent to close at Rs 322 and (4.4 per cent).

Pankaj Pandey, head of research at ICICIdirect, said, “Sentiments are getting better on the belief that we will get a strong mandate in the elections. From an earnings perspective, we are not expecting any significant change in growth or in the earnings trajectory.”

Pandey expects cyclicals to remain under pressure from an earnings perspective. “Improvement in the economy will take time to show. With the current earnings, the market appears richly valued,” he said.

In its world outlook released on Tuesday, IMF projected India to see modest recovery in GDP growth to 5.4 per cent in 2014-15 and 6.4 per cent in 2015-16 on strengthening global growth, improving export competitiveness and implementation of investment projects.

IMF was bearish on all other emerging markets, and reduced its growth forecast for all emerging markets to 4.9 per cent from the current 5.4 per cent level. Dipen Shah, head of private client group research at Kotak Securities, said stock valuations might have gone a little overboard.

“Expectations on the political outcome are supporting sentiments. We maintain that the market will remain volatile in the short term with a positive bias. The focus will shift to growth, interest rates and valuations once the political event is over. Valuations have gone above the long-term average and there is a possibility of a sub-normal monsoon.These can act as headwinds for the market in medium term.”

Among other Asian markets, Hong Kong'’ Hang Seng gained 1.09 per cent, while China’s Shanghai Composite rose 0.33 per cent but Japan’s Nikkei ended 2.1 per cent down after Bank of Japan governor Haruhiko Kuroda denied any plan for additional stimulus. European markets were trading in the green and the US market was up in early trade at the time of going to press.

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