On Friday, stock indices hit new highs for a third continuous session. Bank stocks led the rally, buoyed by a deferment of the implementation of stricter capital norms, as well as continued foreign inflows.
The benchmark BSE Sensex rose 125.6 points, or 0.57 per cent, to close at 22,339.97, an all-time high. On Wednesday and Thursday, it rose 119.07 and 40.09 points, respectively, after ending marginally lower on Tuesday. On Friday, the National Stock Exchange Nifty closed at 6,695.9, also an all-time high.
Bank stocks saw heavy trading, with four of the top five Sensex stocks, in terms of volumes, from the sector. State Bank of India led, rising 3.41 per cent; Axis Bank gained 2.16 per cent.
Manish Sonthalia, vice-president and fund manager, Motilal Oswal Asset Management Company, said, "Banks are likely to see massive outperformance on the hope of a revival in the investment cycle. Banking stocks are seen as a better way to play this revival. Also, the implementation of Basel-III norms has been deferred."
The Reserve Bank of India has deferred the implementation of Basel-III norms by a year, to March 2019. These rules will result in stricter capital regulations for the sector. Meanwhile, ICICI Bank and HDFC Bank fell 0.06 per cent and 0.27 per cent, respectively. "There is a shift among banking stocks-from expensive private banks to inexpensive public sectors ones; this could explain their outperformance," said Deven Choksey, managing director and chief executive, K R Choksey Securities.
Stocks from the metals and realty sectors have rallied. These were considered high-beta stocks, which tended to rise more than others when the market rose and fall harder when the market was on a downswing, Choksey said.
The power sector index fared the best on Friday, rising 3.02 per cent on hopes of a revival in investment, analysts said.
Overall, more stocks closed with gains compared to those that saw losses on the BSE, as foreign institutional investors (FIIs) continued their buying spree. On Thursday, FIIs were net buyers by Rs 1,362.87 crore, according to provisional exchange figures. Domestic institutions were net sellers by Rs 208.34 crore. This month, FIIs have been net buyers by Rs 20,077.2 crore, according to data provided by the Securities and Exchange Board of India.
"There is a shift of capital from China and Russia towards India. Foreign institutions have been large buyers and the outlook on the rupee is positive," Choksey said. In the newsletter 'Greed & Fear', CLSA's Christopher Wood said the brokerage would reduce 'overweight' on Thailand and add to India, "as the BJP's Narendra Modi... continues to run strongly in the polls".
On Friday, trading volumes, or the total value of shares and derivative contracts changing hands, stood at Rs 1.36 lakh crore, according to data from the exchanges.