Sensex at 25-month high

Mon, 5 Apr Closing

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Indian markets rose to their 25-month high today. This was led by strong buying across realty and auto stocks. Strong cues from other Asian markets that rose as positive economic reports from the US boosted investor optimism also aided Indian stocks. On the broader BSE, three stocks gained for every one that closed in the red.

The BSE Sensex and NSE Nifty closed with strong gains of around 240 points (1.4%) and 80 points (1.5%) respectively. Mid and small cap stocks followed suit. The BSE Midcap and BSE Smallcap indices closed up by 1.5% and 2.0% respectively. The rupee was trading at 44.61 to a US dollar at the time of writing.

Telecom major Bharti Airtel was among the biggest gainers on the Sensex today. Other key gainers included Tata Steel and Hero Honda. Gains in Bharti followed reports that the company has outsourced its network upgradation task to Ericsson. The deal is worth US$ 1.3 bn, and is the Swedish company’s third billion-dollar deal with the Indian telecom market leader. Ericsson already manages Bharti’s networks in 15 of 22 telecom circles in India. The deal signals yet another instance when Bharti is looking at improving productivity by outsourcing its non-core requirements to external service providers. Interestingly, this deal comes very close to the company signing a final deal to acquire Zain Africa’s assets in a US$ 10.7 bn transaction.

Power stocks were also in demand today. Key gainers here included Reliance Infrastructure, NHPC, and Tata Power. Gains in Reliance Infra (REL) followed reports that the company has commissioned a 600 MW (megawatt) power plant unit for the Haryana Power Generation Corp. in Hissar, Haryana. As per reports, this is currently the largest thermal power generating unit in the country, and is part of the bigger project of 1,200 MW that is estimated to cost around Rs 38 bn. REL is currently working on projects worth Rs 190 bn, which includes 6 power projects. REL’s stock is also in the limelight post the Rs 18 bn cash infusion into the company by the promoter group. This has taken the promoter holding in the company from 38% to 43%.

Stocks from the banking sector also gained strongly today. Major gainers here included ICICI Bank, Yes Bank, and Bank of Baroda. Earlier during the day, in a meeting with the RBI, several Indian bank chiefs indicated that credit growth during FY11 will be over 20% YoY. The bankers also hinted that they do not expect interest rates to go up soon. Interestingly, this meeting comes just ahead of the RBI’s annual monetary policy meeting scheduled for April 20 to discuss on issues including outlook on credit, deposit growth, lending rates, economic growth and inflation.