Sensex hits new highs, FIIs pump in Rs 5,700 crore

The week saw the Sensex and the Nifty hit all-time highs of 28,335 and 8,477, respectively, thanks partly to the big rally on Friday.

While the Sensex rose 267 points, the Nifty was up 75 points, on the last day of the week.

"The Nifty broke out of the channel it had been in for the last few trading sessions. Even in the absence of cues from global markets, Indian markets rallied on the back of positive news from India Inc and speedy Cabinet approvals for development of infrastructure," says Rakesh Goyal, senior vice president, Bonanza Portfolio.

A number of factors have contributed to the rally. First, the new government had been making the right noises over policy reforms. Now, we are seeing some action. For instance, moving towards the objective of providing 24X7 power supply, the Cabinet this week approved multiple schemes to improve power transmission and distribution networks. Next week, investors will watch policy announcements as the Winter Session of Parliament begins on November 24.

The government is expected to announce more reforms for insurance and infrastructure sectors.

The markets have been getting strong support from foreign institutional investors, or FIIs, who pumped in Rs 5,700 crore this week despite the rupee weakening by 2.5 per cent.

"Major developed market currencies have weakened substantially against the dollar while most emerging market currencies have been resilient in the past few months. The rupee-dollar pair must be watched going forward. We could see the rupee weaken further to Rs 63-64," says Dhananjay Sinha, head, Institutional Research, Emkay Global.

However, lower international crude oil prices have provided some cushion considering it impacts India's fiscal and current account situation as well as fuel price inflation. Another factor that has been aiding markets is falling inflation.

For instance, consumer price inflation, or CPI, come down to 5.52% in October from 6.46% in September. This has led to a large number of rate sensitive stocks such as PSU banks rising on hope of interest rate cuts.

A few stocks that gained this week are Ajanta Pharma (15%), Bayer Cropscience (15%), Balrampur Chini (14%), Bosch (15%) and United Breweries (13%). Losers included Balkrisha Inds (55%), Kailash Auto Fin (24%), Bajaj Electrical (22%), Essar Oil (16%) and Future Retail (13%).

The big event this week was Kotak Mahindra's announcement of a $2.4-billion all-share deal to acquire ING Vysya Bank, creating the fourth-largest bank. ING Vysya Bank shares rose 12% during the week while Kotak gained 7%.

IT shares fell with Infosys leading the losses after a top executive of its BPO unit was found to be involved in an overbilling scandal. The BSE Bankex rose 481 points, or 2.38%, followed by the capital goods index (which rose 318 points or 2% during the week).