The market began the calendar on an upbeat note, as sentiment was boosted by the fiscal deal in US which helped avoid the much talked about 'cliff' for now.
The market began the calendar on an upbeat note, as sentiment was boosted by the fiscal deal in US which helped avoid the much talked about “cliff” for now.
The Senate approved a last-minute deal early Tuesday morning to scale back USD 600 billion in scheduled tax hikes and government spending cuts that threatened to push the economy into recession.
Investors chased metal and banking shares, lifting the Sensex by 154 points to 19580. The Nifty rose 46 points to close at 5950. Hindalco, Jindal Steel, Tata Steel, ICICI Bank and SBI were among the big gainers, rising 2-3 percent.
Laggards were mostly from the IT, pharma and FMCG sectors.
Realty shares were the star performers among midcaps as investors are betting that a likely reduction in interest rates will boost demand for residential property. Shares of DLF, Unitech, HDIL, Parvsnath Developers, Indiabulls Real Estate and Oberoi Realty gained 2-4 percent.
"Given the expectations of 50 basis point-cut (100 basis points equals 1 percent) in interest rates in the next one year, we expect demand (for real estate) to improve on higher affordability,” said a recent report by Crisil Independent Equity Research “This will also provide some respite from the high interest costs and boost earnings. As a result, we expect valuation multiples to improve and return to historical levels of FY09-10," the report said.
A section of the market is skeptical if the market can sustain its recent gains, given the worsening macro-economic environment.
"We expect Current Account Deficit to print 4.3% of GDP in FY2013 (previous estimate 4.2%). With stable risk conditions globally, we expect the BoP (Balance of Payment) deficit to be restricted to USD 5.6 billion," said a report by Kotak Securities today.
"The risk however emanates from (1) global risks of a US fiscal cliff and uncertainties regarding the European sovereign debt crisis leading to lower capital flows to India and (2) domestic uncertainties-political and economic (Union Budget 2013-14)," the report added.
Domestic institutions were net sellers of equities in 2012, making foreign funds critical if the market has to build on its recent gains. And some economists worry that the rupee could slowly start coming under pressure.
"Unless the government takes solid steps to tackle the fiscal deficit and improve the investment climate – on which we are skeptical given it is a pre-election year – our bias in 2013 (particularly in H2) will be to build on a long USD/INR(Indian rupee) position. We expect USD/INR at 54.5 by March 2013, 56.0 in June 2013 and 59.0 by December 2013," said a note by Nomura.