Indian shares hit record highs on hopes of new government

 08 Mar 2014 - 1:12

An onlooker watches the digital broadcast on the facade of the Bombay Stock Exchange (BSE) during intra-day trade in Mumbai yesterday.

MUMBAI: India’s shares hit fresh lifetime peaks yesterday, boosted by an easing strain on public finances and hopes that a pro-business government would soon be elected to bring economic growth back on track.
The Bombay Stock Exchange’s benchmark index gained 1.64 percent from its previous close to reach a record of 21,866.51 points, while the National Stock Exchange index rose to 6,514.35 points, posting a 1.76 percent increase.
Analysts say the share surge is driven by opinion polls pointing to an election win by the main opposition Bharatiya Janata Party (BJP), seen as business-friendly and capable of pushing through economic reforms, in a vote due by May.  
“All surveys are suggesting that most likely (Bharatiya Janata Party candidate) Narendra Modi will take over as prime minister, which should be good for business,” said Rahul Bhandawat, an equity analyst at Mumbai’s Equentis Capital.
A string of corruption scandals and an economy growing at a decade-low of just under five percent have drained popularity away from the ruling left-leaning Congress-led coalition.
Indian shares have also gained traction from signs the country may be getting its public finances in order. 
The current account deficit — the broadest trade measure —showed a slide to 0.9 percent of gross domestic product (GDP) or $4.2bn in the three months to December, from 6.5 percent of GDP or $31.9bn in the same period a year earlier. The deficit’s ballooning to a record 4.8 percent of GDP in the full 2012-13 fiscal year triggered market turmoil and prompted analysts to warn India could lose its prized investment-grade credit rating.
Recent stock market gains have also been propelled by foreigners buying into the so-called “India story” of potential high returns in the longer term.
Foreign institutional investors (FIIs) have purchased $5.5bn of local equities, data from the Securities and Exchange Board of India showed.
“The current gains (in stocks) are unlikely to be start of a new bull run,” the Equentis Capital analyst said, adding that a big bout of share selling could not be ruled out.