Sensex, Nifty Hit Record Highs, Insurers Gain

The benchmark BSE Sensex and the broader Nifty rose to record highs on Thursday after cabinet approval for a higher foreign direct investment limit in insurance and a rejig in foreign debt limits reinforced optimism about the government's reform agenda.

The Sensex rose to a life high of 26,292.66, surpassing its previous record high of 26,190.44 hit on July 8, while the Nifty hit a new peak for a second straight session at 7,835.65.Indian shares hit record high on FDI hike in insurance sector.

Gains were also underpinned by higher emerging equities which hovered near 17-month highs after a private survey showed surprisingly strong Chinese manufacturing data, boosting blue-chips such as HDFC Bank.

The Nifty rose 5.1 per cent in the last eight consecutive sessions of gains compared to a 2 per cent rise in the MSCI Asia Pacific Ex Japan index in the same period.

Overseas investors bought Indian shares worth Rs 652 crore ($108.81 million) on Wednesday, totalling inflows of $723.80 million over six consecutive days of buying, and nearly $12 billion in 2014 so far, exchange and regulatory data showed.

"Foreign investor interest is already high and the government is doing a lot of reforms to revive the economy. Monsoon progress and RBI (Reserve Bank of India) review in August are next on radar," said Nirakar Pradhan, chief investment officer at Future Generali India Life Insurance.

The Sensex rose 0.48 per cent, or 124.52 points, to end at 26,271.85, while the Nifty gained 0.45 per cent, or 34.85 points, to end at 7,830.60.

Insurers gained after the cabinet approved raising the foreign direct investment (FDI) limit in the insurance sector to 49 per cent from 26 per cent. The hike now needs to be approved by parliament.

Reliance Capital gained 4.1 per cent, while Max India Ltd ended up 0.7 per cent.

Expectations of reforms were reinforced after India on Wednesday allowed foreign fund managers to hold more government bonds by tweaking the amount that foreign institutional investors can buy while keeping the overall limit in debt markets intact.

Blue-chips rose tracking higher Asian shares. HDFC Bank rose 0.7 per cent, while ITC ended higher 0.8 per cent.

Indian metal companies surged after a surprisingly strong reading on Chinese manufacturing.

Tata Steel Ltd rose 2.4 per cent and JSW Steel ended higher 3 per cent.

Hindalco Industries rose 2.2 per cent, while National Aluminium Co advanced 2.4 per cent.

Bank of Baroda rose 3.4 per cent, adding to Wednesday's 2.6 per cent gain after the Reserve Bank of India removed the stock from its caution list, making it eligible to be bought by foreign investors in the primary and secondary markets.

However, Ipca Laboratories slumped 13.3 per cent after the company said it has voluntarily halted shipments to the United States from one of its drug ingredient manufacturing plants after the US Food and Drug Administration.

Cairn India shares slumped 6.7 per cent on the company's $1.25 billion loan facility to parent group Vedanta Group, of which $800 million was disbursed in the first quarter, Jefferies said in a note.

Copyright: Thomson Reuters 2014