Mumbai: Just as emerging market investors were wondering whether the end of the US Federal Reserve’s bond-buying programme would mean pulling the plug, the Bank of Japan sprang forth unexpectedly to ensure the party won’t stop by sharply expanding its stimulus.
The 30-share BSE Sensex rose 1.90% to 27,865 points while the 50-share NSE Nifty was up 1.87% at 8,322, but off the day’s high of 8,330.75.
India’s key indices jumped to new records on Friday, tracking a global rally, on hopes that some of the Japanese central bank’s largesse will find its way into emerging markets. Global ratings agency Moody’s comment that it may consider a ratings upgrade on India also boosted sentiment.
Foreign institutional investors (FIIs) stepped up purchases of Indian stocks, pumping in about Rs 1,750 crore on Friday. These investors have bought shares worth Rs 5,500 crore in the past eight days after net sales close to Rs 7,200 crore in a month.
Shares of capital goods, power and construction companies, which have been out of favour lately, led the rally on Friday. The Bank of Japan on Thursday decided to accelerate purchases of government bonds to 80 trillion yen ($725 billion) annually, up by 30 trillion yen.
Nonetheless, investor sentiment in India remains upbeat because of the Narendra Modi government’s market-friendly initiatives. With inflation softening and fuel prices declining, the chorus in the market for an interest rate cut is growing though there is no indication that the Reserve Bank of India will be in any mood to oblige at its next monetary policy announcement on December 2.