A bronze bull sculpture is seen as an employee walks out of the Bombay Stock Exchange building in Mumbai. The Sensex surged nearly 2% yesterday to record highs for the second consecutive day after Bank of Japan’s surprise expansion of its massive stimulus programme raised hopes for additional foreign inflows.

Reuters

Mumbai

Indian shares surged nearly 2% yesterday to record highs for the second consecutive day after Bank of Japan’s surprise expansion of its massive stimulus programme raised hopes for additional foreign inflows, boosting blue-chips.

In a rare split decision, the BoJ’s board voted 5-4 to accelerate purchases of Japanese government bonds so that its holdings increase at an annual pace of ¥80tn ($725bn), up by ¥30tn.

BoJ’s easing is being seen as an alternative to the US Federal Reserve’s just concluded bond-buying programme, supporting the rally in emerging markets such as India, already underpinned by reforms and hopes of a rate cut.

“BoJ’s easing would further the argument of central bankers other than Fed providing stimulus to support economies and assets,” said UR Bhat, managing director at Dalton Capital, a unit of the UK-based investment management firm Dalton Strategic Partnership that manages nearly $2bn in assets.

“I agree there are strong expectations of a rate cut. But there is no tax on expectations. Is it?”

Foreign portfolio investors have bought shares worth $13.45bn and $22.44bn in debt in Asia’s third-largest economy so far this year.

India ended fuel price controls, raised gas prices, proposed opening up of the coal sector and relaxed rules for foreign investment in construction, earlier in October.

The 30-share BSE index rose as much as 2% to an all-time high of 27,894.32, before ending up 1.9% at 27,865.83.

The broader NSE index gained as much as 1.98% to mark a record high of 8,330.75, and finished 1.87% higher at 8,322.20. Both indexes surpassed their previous record highs hit on Thursday.

October also marked an eighth month of gains in nine for the indexes, mainly helped by optimism tied to the election of Narendra Modi as Prime Minister and thereafter by a 24% slump in crude oil price since June.

The NSE index rose 4.5%, while the BSE index advanced 3.64% in October.

Shares also marked their biggest weekly gains since June.

The BSE rose 3.8%, while NSE gained 3.84%.Blue-chips led the gains yesterday, with engineering company Larsen & Toubro surging 3.6%, while mortgage firm Housing Development Finance Corp finished 3.9% higher.

Infosys closed up 2.7% and Reliance Industries gained 2.2%. Among lenders, HDFC Bank rose 1.7%, while State Bank of India advanced 2.5%.

IDFC surged 5.4% after company’s July-September operating profit rose to Rs9bn, beating expectations and after its board approved the demerger of financing undertaking.

Among stocks that fell, watches and jewellery maker Titan Co slumped 6.2% to mark its biggest single-day fall since September 2013 after its quarterly earnings lagged estimates.

Meanwhile the rupee shrugged off weakness in major Asian currencies to post a modest gain yesterday on strong foreign inflows, reversing the depreciating trend of the last three days.

The Bank of Japan’s surprise monetary stimulus strengthened the dollar, causing a slide in the yen as well as other major Asian currencies and nibbling away at the rupee’s gains on the day.

For the month, most Asian currencies reported losses barring the Indonesian rupiah and the Indian rupee.

The rupee rose around 0.7% on the month in October tracking easing inflation, a ratings outlook upgrade by S&P and policy steps from the government, which helped propel more dollar inflows as confidence in the Indian economy grows.

Foreign investors have bought around $2.4bn in both debt and equity so far in October, pushing the total inflows to nearly $36bn so far in the year.

Analysts expect the local currency to strengthen on continuing foreign inflows, although traders say the Reserve Bank of India might continue to intervene and check the rupee’s rise.

“There are FII inflows in both debt and equity and FDI (foreign direct investment) is increasing. But, given the intervention from the RBI, appreciation for INR is limited,” said Paresh Nayar, head of foreign exchange and fixed income trading at First Rand Bank.

“The immediate level to watch (out for) is 60.85-60.90 (to the dollar).”

The partially convertible rupee closed at 61.3950/4050 per dollar, a tad stronger from Thursday’s 61.45/46.

In the offshore non-deliverable forwards, the one-month contract was at 61.53/63, while the three-month contract was at 62.12/22.

 

 

 

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