MUMBAI: Robust foreign fund inflows and an appetite for IT companies sent the Mumbai blue-chip index to a sixth straight higher close on Tuesday, its longest winning streak in three months.
While the long-term outlook was positive, some traders said stocks may soon see a correction in the near term with the index at a 32-month high.
A lower-than-expected rise in headline inflation in August provided some comfort. But with inflation still above the Reserve Bank of India’s comfort zone, market expectations of a hike in key rates at the bank’s policy review on Thursday remain unchanged.
The 30-share BSE index added 0.72%, or 138.63 points, to touch 19,346.96, with two-thirds of its components closing in the green. It hit 19,487.02 points in early trade, the highest since January 2008. “In the short run, the market has run up fast. The breadth in the large-cap space is not as promising as one would want it to be,” said Sandip Sabharwal, CEO of portfolio management services at broking firm Prabhudas Lilladher.
“A correction is likely in the next two weeks, but the long-term outlook is definitely optimistic.”
The benchmark index has scaled new 32-month peaks for three consecutive sessions and has added 10.8% so far in 2010. Foreign funds have pumped in $13.7 billion so far this year, following a record inflow of $17.5 billion last year, which led to an 81% jump in the benchmark index.
Export-focused software firms rose, shrugging off comments from leading IT companies that, though customers were spending on technology, the mood is cautious. Dealers said the firms gained on expectations of an improvement in the US economy, one of their key markets.
Leading IT players Tata Consultancy Services (TCS) and rival Infosys Technologies touched all-time highs earlier in the day. TCS closed 1.7% higher, while Infosys and Wipro climbed 1.4% and 3.7%, respectively.
Auto shares rallied on expectations of continued robust sales as the festive season, when buying jumps sharply, approaches, dealers said.
According to Thomson Reuters data, vehicles maker Tata Motors rose to its highest level in at least 20 years before it closed 2.7% higher at ` 1,054.45. Top utility vehicle manufacturer Mahindra & Mahindra scaled a record high and gained 1.4% at close. Leading carmaker Maruti Suzuki added 1.5%. Financials closed mixed as fears of an imminent interest-rate hike shadowed optimism over loan demand in a fast-growing economy.
Leading private-sector lenders ICICI Bank and HDFC Bank climbed 0.3% and 2.3%, respectively. Mortgage lender HDFC firmed 1.3%. Top lender State Bank of India bucked the trend and fell 1.1%. Non-ferrous metals producer Sterlite Industries, a unit of London-based Vedanta Resources, rose 2.7% as HSBC Securities initiated coverage on the stock with an “overweight” rating. The broader market’s breadth was weak with losers outnumbering winners in a 2:1 ratio on a moderate volume of 467 million shares. The 50-share NSE index climbed 0.6% to 5,795.55 points.
