The BSE and NSE benchmark indices began the new year on a high note today on reports that the US White House and Congressional Republicans have reached an agreement to avert the ‘fiscal cliff’. After a positive start, the Sensex and Nifty steadily consolidated their gains. At 9.48 a.m., the 30-share BSE Sensex was up 122.52 points at 19,567.36, while the NSE Nifty traded at 5,947.35, 39 points higher.
Shares in Kingfisher Airlines slumped over 5 per cent after its flying licence expired on Monday. The airline failed to convince the aviation regulator about how it plans to fund operations under a proposal to be airborne again. However, the airline said the expiration of its operating licenses was not a cause for concern as the grounded Indian carrier has two years to renew the license and permits required to fly.
Private banks such as ICICI Bank gained 1 per cent, while HDFC Bank was up 0.8 per cent on hopes of rate cut by the Reserve Bank of India by January-end.
Traders are likely to watch the third quarter earnings season for further cues.
The rupee rose in opening trade today, boosted by a deal to avert the U.S. "fiscal cliff", but gains were capped by a surge in the country's current account deficit
India's current account deficit widened to a record high at 5.4 per cent of gross domestic product in the September quarter as export growth slowed more sharply than imports, with a similar gap expected in the December quarter likely to prolong weakness in the rupee.
The Sensex ended 2012 with its best gains in three years as strong foreign inflows and the government's fiscal and economic reforms outweighed worries about the domestic economy.
Foreign investors have pumped in over $24.2 billion (Rs 132,405.50 crore) this year, marking the biggest inflows since a record $29.36 billion in 2010, on the back of cheaper valuations and government measures to further open up the retail and aviation sector.
Indian stocks could gain further next year due to expected interest rate cuts from the Reserve Bank of India and on improved earnings, while investors are also gearing up for a potential revival in initial public offerings.
"(The) most important challenge is of fiscal deficit which will remain in 2013," said Vaibhav Sanghavi, director at Ambit Capital.
Overnight, US stock markets rallied after a choppy trade on hopes that a deal would be reached soon ahead of ‘fiscal cliff’ deadline.
Sources said early today that an agreement had been reached upon a deal to avoid the so-called ‘fiscal cliff’. The measure would extend Bush-era tax cuts for family incomes below $450,000 and delay across-the-board spending cuts set to strike the Pentagon and domestic agencies this week by two months.
With inputs from AP, Reuters