The government's resolve to contain the fiscal deficit and continued efforts to unleash economic reforms coupled with the encouraging news from Spain lifted India's benchmark share indices to their 14-month closing highs in the volatile week ended September 28.
The 30-share Sensex ended up 10 points at 18,762.74 and the 50-share Nifty ended up 12 points at 5,703.30. The Sensex had ended at 18,762.80 on July 1, 2011 while the Nifty had ended at 5,728.95 on July 7, 2011.
The Sensex has gained 21% in calendar 2012 so far and a whopping 24% from its 52-week low of 15,136 on December 20, 2011.
Most of the gains for the week was on account of the sharp rise on Friday as Spain’s plans for economic reform eased some worries about one of the euro zone’s most troubled countries.
The sharp appreciation of the Indian rupee also favoured foreign institutional investors as they turned aggressive buyers. The rupee rose to a new five-month high of Rs 52.86 to a dollar on Friday. The currency has gained almost five per cent in September, the highest against other Asian currencies. This was a consecutive monthly gain for the rupee.
Foreign institutional investors (FII) on Tuesday (Sep 25) invested a whopping $1.1 billion into Indian stocks adding to their year’s buying tally of $14.75 billion. For the month of September 2012 (till Sep 27), they have pumped Rs 19,261.50 crore ($3.56 billion) in Indian equities.
The government has proposed a hike in rail fares and has stuck to its borrowing target for the current fiscal in an effort to keep the rising the fiscal deficit under control.
Expenditure control, a fall in subsidies, divestment programmes and spectrum auctions would ensure the fiscal deficit was under control, N S Venkatesh, chief general manager and head of treasury, IDBI Bank, said, adding this was why the government had not increased the borrowing target.
India's fiscal deficit during the April-August period rose to Rs 3.38 lakh crore or 65.7% of the full fiscal year 2012-13, government data showed on Friday. During the same period in the last fiscal year, the deficit was 66.3% of the budget target. In March, the government had budgeted a fiscal deficit of 5.14 lakh crore 5.1% of the gross domestic product (GDP) for the current fiscal year.
Eight core industries grew at a slower pace of 2.1% in August, as against 3.8% in the same month last year due to negative growth in crude oil, natural gas, fertiliser and cement. During April-August this fiscal, the growth has slowed to 2.8%, from 5.5% in the year ago period, according to official data released today.
The gains during the week were led by Consumer Durables, FMCG, Realty, POwer and Healthcare, Capital Goods and Auto indices which gained between 1.4-4.8% each.
Mahindra & Mahindra was the top Sensex gainer up 7% on reports that the company plans to invest Rs 1,500 crore to develop a new vehicle platform with its Korean subsidiary Ssangyong Motor. Among other auto stocks, Maruti Suzuki was up 2.8%, while Bajaj Auto was up 1.8%.
Among capital goods shares BHEL surged 6.3% on value buying at lower levels. The stock has been gaining ever since the company clarified that the ongoing controversy over coal allocation for power plants would not have any impact on its operations. L&T witnessed profit taking after hitting 52-week high to end flat.
In the pharma segment, Cipla rose 5.3% while Sun Pharma gained 3.6%. Pharma shares gained as the proposed drug pricing policy for essential medicines is unlikely to have a significant impact.
FMCG majors ITC gained 3.9% while Hindustan Unilever was up 2.8% on hopes that the normal monsoons would boost farm income leading to higher rural spends.
Tata Power gained 4% during the week. Coastal Gujarat Power Ltd , a Tata Power company that operates the Mundra UMPP, had approached the CERC seeking a mechanism to offset the increase in cost of production by passing it to the buyers. The company is seeking a revision of about Re 1 per unit from this project, the media report suggests.
The broader markets outperformed the benchmarks as investors booked profits at higher levels in index stocks and shifted focus to value buying in select mid-cap and small-cap shares. The Mid-cap index gained 2.7% and the Small-cap index gained 3.1% during the week under review.
Investors will be eyeing auto sales and second quarter earnings that will be unveiled in the week ahead.