The markets continued their positive momentum, opening higher on Wednesday, on hopes of the final passage of the US bill meant to prevent Washington from pushing the world's biggest economy into recession. The Nifty hovered near the 6,000 mark, a level last seen in January 2011.
At 9:15, the 30-share BSE Sensex was up 0.76 per cent, or 148 points, at 19,728.99, while the broader NSE Nifty gained 43 points, or 0.73 per cent, to 5,994.05.
All the 30 stocks on the Sensex traded in the green, led by BHEL. Metal stocks continued to rally today with the metals sector index gaining 1.13 per cent. Realty and power sector indices too traded over 1 per cent higher. Most of the Nifty stocks also opened with gains.
The Sensex rose on Tuesday after the U.S. averted the looming 'fiscal cliff' in a last-minute deal with hopes of a rate cut by the Reserve Bank of India beginning to gather steam, leading to gains in bank shares. The Sensex gained 0.79 per cent, or 154.10 points, to end at 19,580.81 yesterday after earlier hitting its highest level intraday since April 27, 2011. The broader NSE Nifty rose 0.77 per cent, or 45.75 points, to end at 5,950.85. Foreign institutional investors net invested Rs 665 crore on Tuesday, according to provisional data from the Bombay Stock Exchange.
Tirthankar Patnaik of Religare Capital Markets said, “Our December 2013 Sensex target of 22,500 is based on a 14.5x target P/E multiple, which implies a 16 per cent upside from the current levels. Our top picks for 2013 are State Bank of India , Tata Motors and L&T.”
While Indian stocks are expected to remain firm in January tracking expectations of a rate cut by the Reserve Bank of India, negative local fundamentals, namely twin deficits and sticky inflation, may limit the outperformance in the near term.
"While the macro environment both domestically and globally does not inspire much confidence, at the micro level things are looking good," said Atul Kumar, Senior Fund Manager at Quantum Asset Management Company Pvt. Ltd.
The fiscal deficit is likely to exceed the target set by the government due to higher subsidy burden, which can also turn into a constraint for the RBI to cut rates, added Kumar.
Option traders see the probability of the 50-stock index Nifty inching closer to 6,200 levels in the January derivative series which ends on January 31.
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 pumped in more than $24.2 billion 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.
(With inputs from AP, Reuters)