Reform hopes cheer markets; Sensex nears 19-month high

The Indian equity markets surged as the government finally agreed to vote on its decision to implement FDI in retail.

Both indexes headed towards 19-month highs after the government decided to take a major step towards ending a deadlock that has paralysed parliament for days.

Egged on by the reform talk, Sensex crossed the 19000 mark to close at 19171 with a 1.75 percent gain , and Nifty closed at 5825 with a 1.70 percent gain.

The rupee also rose to over one-week high on Thursday, breaching 55 to a dollar, after the government agreed to a vote in parliament on multi-brand retail, sparking hopes of the passage of much needed reforms legislation.

Investment bank Goldman Sachs has raised India to ‘overweight’ from ‘market-weight’, citing growth recovery and inflation moderation ahead. The investment bank pegged December 2013 Nifty target at 6,600 points.

The investment bank also said that India’s economic growth is likely to accelerate to 6.5 percent in 2013 backed by favourable external sector demand outlook and a pick-up in domestic reforms.

However,Prime Minister’s Economic Advisor Council Chairman Dr C Rangarajan has pegged that the current account deficit during this fiscal will be at 3.5 percent of the GDP, much higher than the expected levels, and said that there was need to bring it down at “moderate levels.”

Ahead of the Q2 GDP numbers tomorrow, Sameer Goel, Head of Currency Research at Deutsche Bank in an interview with CNBC TV18 said that “Typically, it is seen that unless the growth numbers deviate very sharply from the expectations the market reaction remains muted. In the currency space, a weaker number would further increase expectations that the Reserve Bank of India (RBI) might step in to cut rates earlier than expected.”

Stock in news

Cinemax and PVR closed up 5 and 8 percent respectively after PVR bought 69.27 percent stake in Cinemax.

GMR closed down 0.83 percent after Maldives scrapped the airport development plan.

Rate sensitive sectors including banks, real estate and auto stocks rallied. HDFC Bank and ICICI Bank closed up 3 and 5 percent respectively. DLF closed up 1.68 percent

Apollo Hospitals closed down 8 percent after Hong-Kong based investment firm CLSA sold its stake in the company.

Indiabulls Finance, Suzlon Energy, IRB Infra were among the noted gainers while Apollo Hospitals, Mphasis, Adani Ports were major losers today.