MUMBAI: The equity markets staged a spectacular rally on Friday hitting record highs for the second consecutive day after the Bank of Japan surprised investors with a massive expansion of its stimulus measures.
According to market participants, the BoJ’s decision to ramp up its stimulus measures are viewed as an alternative to the US Federal Reserve’s just concluded bond-buying programme.
After opening on a positive note, the Sensex soared 519.50 points or 1.90 per cent to end the day at a record high of 27,865.83 while the Nifty climbed 153 points or 1.87 per cent to end the day at 8,322.20.
The Nifty gained 100 points from 8,200 to 8,300 levels in just five hours and this could be a record. “Markets are now completely under the firm control of ‘Bulls’ as most of the short positions in the markets have been covered during the last two trading sessions,” said U.R. Bhat, MD, Dalton Capital Advisors.
While the valuations of the Indian markets at the moment are looking quite expensive as compared to their emerging market peers, he pointed out that overseas invest-ors are still bullish because of India’s high economic growth potential and corporate earnings potential.
“The market could see another 4-5 per cent rally from the current levels by the end of December 2014. However, we could also see some amount of profit booking at higher levels,” added Mr Bhat.
“The markets are now trading entirely in a new territory after the Nifty crossed 8,300 level mark. Bearish investors were completely caught off-guard on Friday as they were forced to cover their remaining short positions in the market after the Nifty breached its key psychological barrier of 8,200, which pushed the markets to their all time high,” said Ambareesh Baliga, market expert.
According to the provisional data released by the stock exchanges, FPI purchased shares worth Rs 1,754.73 crore. Mr Bhat noted that foreign investors still have high hopes from the Modi government on policy reforms though nothing really has happened at the ground level.
“We expect the Modi government to capitalise on an approaching 11-month election free window to move ahead decisively on its reform agenda,” said Abhay Laijawala and Abhishek Saraf, research analysts at Deutsche Bank in their India strategy report.
According to them aggressive reform policies like enactment of the insurance amendment bill, tabling of the constitutional amendment bill for GST and amendments to land and labour laws would act as a catalyst for the market and will boost investor confidence.
