India Stock Index Reaches Record on Foreign Buying

MUMBAI, India (AP) — India’s benchmark Sensex index closed at a record high Thursday, after the Federal Reserve’s decision to buy $600 billion in government bonds to shore up the United States recovery drove a surge of foreign investment into fast-growing India.

The Sensex closed up 2.1 percent, at 20,893.6 points, topping a January 2008 closing high of 20,873.33, according to Bombay Stock Exchange data. The index touched an intraday high of 20,917.0, 290 points shy of its record intraday high on Jan. 10, 2008.

“It’s the Fed’s quantitative easing,” said Nandan Chakraborty, managing director of institutional equity research at Mumbai’s Enam Securities. “It’s great for India.”

Mr. Chakraborty said the Fed’s announcement, against a backdrop of slow growth and near zero interest rates in the developed world, would continue to bolster emerging market stocks, commodities and the rupee. A rising rupee will help India’s importers, like engineering, infrastructure and telecom companies, but will hurt its software services exporters, like Infosys and Tata Consultancy Services, which get more than half their revenue from North America.

On Thursday, foreign investors poured $635.9 million into Indian equities and debt, bringing the year-to-date total to a record $36.3 billion, according to the securities regulator.

India’s central bank has been less concerned about the flood of foreign investment — and its export-bruising impact on the rupee — than other emerging Asian economies because India must finance a growing current-account deficit and an ambitious $9 billion government divestment program.

The central bank has warned that it will intervene if capital flows become disruptive.

India also suffers from higher consumer price inflation than any other major world econ

omy, which makes the Reserve Bank of India more tolerant of the rupee’s rise. The bank seems more concerned about the damage to export competitiveness from inflation than rupee appreciation.

Coal India touched a high of 344.75 rupees ($7.80) on the Bombay Stock Exchange before settling at 342.35 rupees compared with an offering price of 245 rupees a share.

The government sold 10 percent of its stake in Coal India, which controls about 80 percent of the nation’s coal market, raising $3.4 billion in India’s largest initial offering ever.

Reliance Industries, HDFC Bank, State Bank of India and Tata Motors all closed up 3 percent or more.

Courtesy : nytimes

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