Shrugging off its image of being in a state of 'policy paralysis', the government unleashed a blitz of reforms on Friday, including diesel price hike and opening up FDI in several key sectors.
The BSE Sensex surged to its highest in 14 months, with retailers such as Pantaloon Retail and airlines including SpiceJet rallying after the government opened up the sectors to foreign direct investment. Foreign investors are expected to be big buyers of Indian stocks. Foreign institutional investors have been bought nearly Rs 6,000 crore worth of equity shares in September and half of which came in on Friday itself.
Even Deutsche Bank and Citigroup raised their targets for the BSE stock indexpredicting the measures would attract stronger foreign investor flows.
"The measures were a "huge signal, symbolic of the government's reform commitment and an endorsement of its recognition of the urgency to put the economy above politics, for now," Deutsche Bank said in its note.
While Deutsche Bank raised its December 2012 target for the BSE Sensex to 20,000, Citigroup raised its BSE target to 19,900 for June 2013 from its previous target of 18,400 for December.
However, investors are still wary ahead of the RBI's monetary decision due out at 11 a.m. Analysts expect the Reserve Bank of India to keep its rates on hold for now.