Reuters

Indian shares soared to record highs yesterday as lenders surged after Kotak Mahindra Bank’s acquisition of ING Vysya sparked hopes for further consolidation in the sector, while expectations of more reforms ahead of the winter session of parliament also helped.

NSE’s bank index surged 2.4% to hit a record high of its own, helping the benchmark indexes mark their fifth consecutive weekly gains.

Investors were also hopeful Prime Minister Narendra Modi’s government would push for reforms such as the goods and services tax, disinvestment, and changes in land acquisition laws in the winter session of parliament scheduled to begin next week.

Markets are also waiting for the Reserve Bank of India’s policy review on December 2 amid hopes that easing consumer inflation will lead the central bank to ease monetary policy earlier than expected.

“Markets and even RBI’s decision will depend on the government’s actions on the fiscal front in the winter session and on rupee’s behaviour,” said Deven Choksey, managing director at KR Choksey Securities.

The benchmark BSE index closed 0.95% higher, coming off a life high of 28,360.66 hit earlier in the session.

The broader NSE index ended up 0.9% after surging to an all-time high of 8,489.80. Both the indexes also gained 1% each to mark their biggest weekly gain in three.

Banks were the top gainers in all broad indexes after Kotak Mahindra Bank agreed to buy ING Vysya in an all-share deal, valuing its smaller rival at $2.4bn.

The deal raised hopes for more mergers in the sector amid rate-cut hopes that will boost the earnings and valuation outlook for the sector.

Kotak Mahindra Bank rose 3.7% after earlier marking a record high of Rs1,264.70 for the second straight day, while State Bank of India gained 2.8%.

Banks that markets see as potential acquisition candidates surged. Karnataka Bank rose 5.2%, Karur Vysya Bank gained 1%, while City Union Bank rose 3.3%.

Potential suitors also rose. ICICI Bank rose 2.9% and Axis Bank ended up 2%.

Yes Bank shares also gained 4.1% after the central bank said on Thursday that restrictions placed on the purchase of its shares by foreign investors were withdrawn.

Spicejet shares surged 15%, marking their biggest daily gain since April 2014, after news channel CNBC TV18 reported its parent group may have finalised an investor for the airline, citing sources.

“While the company is exploring various options to further capitalise, we are unable to comment on specifics at this stage,” a spokesperson for SpiceJet said.

Among losers, exporters fell after the rupee strengthened from a nine-month low on Thursday.

Software exporter Infosys fell 1.9%, while Sun Pharmaceutical Industries lost 1.2%.

Meanwhile the rupee gained yesterday, recovering from its nine-month low hit in the previous session as sentiment improved after China cut interest rates and as domestic shares soared to record highs ahead of the start of the winter session of parliament.

Still, the rupee fell 0.1% against the dollar this week, its fourth consecutive fall, on the back of a global rally in the greenback.

Sentiment improved somewhat yesterday after China unexpectedly cut benchmark interest rates, stepping up a campaign to prop up economic growth in the world’s second-largest economy. Traders also cited hopes the government would push through reforms in the winter session of parliament due to start on Monday, which helped push domestic indexes to record highs.

But, analysts do not expect wide moves in the rupee next week.

“I expect the rupee to be in rangebound trade,” said Vikas Babu Chittiprolu, a senior foreign exchange dealer with Andhra Bank, who expects the local currency to trade in a range of 61.60/62.20 next week.

The partially convertible rupee closed at 61.7625/7725 per dollar versus its previous close of 61.94/95. On Thursday, it had touched a low of 62.22, its weakest level since February 20.

Intraday, there was some dollar demand from state-owned banks as India is soon due to pay a third tranche of $400mn to Iran ahead of a November 24 deadline to an interim deal with six world powers that allows Tehran to recover part of its overseas frozen oil revenues.

In the offshore non-deliverable forwards, the one-month contract was at 61.98/62.08, while the three-month was at 62.52/62.