 "Banking reform hopes spark rally on Dalal Steet")
The Indian markets surged the most in two weeks led by banking stocks, which gained on expectations from the meeting between the Prime Minister and head of state-owned banks.
Capital goods and infrastructure stocks also posted sharp gains buoyed by improvement in manufacturing activity, as indicated by a private survey.
Gaining for a sixth straight day, the benchmark BSE Sensex rose 380.36 points, or 1.38% to 27,887.9, highest level since December 8. The board-based NSE Nifty index added 111.45 points, or 1.35% to 8,395.45 and gained 2.4% during the week.
Index heavyweight from the banking sector ICICI Bank gained 2.81% to Rs 362.6, while State Bank of India (SBI) rose 0.4% and Axis Bank added 2.44%. Banking stocks have around 30% weightage in the benchmark Nifty and the Sensex.
Prateek Agrawal, chief investment officer, ASK Investment Managers said that stocks ran up on expectations from the bankers summit with the PM. The expectations were wide-ranging, he suggested.
The Bank Nifty, an index of 12 banking stocks, rose 1.64% to close at all-time high of 19,057.8, surpassing its previous high hit on December 23.
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"Processes will be implemented (which would help to ensure that) NPAs will be reduced...(steps may also be taken to address the issues of) weaker banks," he said.
The finance ministry has arranged a two-day meet between heads of public sector banks, ministry and Reserve Bank of India (RBI) officials starting Friday. The market is hoping that the government will announce the blueprint for the next set of reforms during the meet, which will also be attended by the PM Narendra Modi and the Finance Minister Arun Jaitley.
Capital goods stocks including L&T and Bhel, also gained over 2% each, after the HSBC India Purchasing Managers' Index (PMI) climbed to a two-year high of 54.5 in December 2014. Investors lapped up capital goods and infra stocks as the PMI index indicated a sharp improvement in order flow and manufacturing activity.
Foreign institutional investors (FIIs) bought shares worth Rs 260 crore, while domestic investors invested Rs 70 crore on Friday, provisional exchange data showed. The Indian market posted sharp gains despite other global markets trading mixed.
The Indian market was one of the best-performing markets in 2014 having gained 30%. Analysts are expecting the market to clock positive returns this year as well on hopes of reforms, monetary easing and improvement in the economy.
"The year 2015 seems to be really good for both the markets and economy. Things should improve further with inflation falling and economy recovering and monetary easing taking place," said Nischal Maheshwari, head of research, wholesale capital markets, Edelweiss Financial Services.
Most sectoral indices of the BSE ended with gains on Friday. The overall market breadth was also positive with almost two gaining stocks for every one losing stock. The combined cash turnover on Friday stood at Rs 17,000 crore compared to just Rs 10,500 crore on the previous day. The NSE and NSE daily cash market turnover have averaged just Rs 12,000 crore in the past two weeks as against Rs 22,000 crore in November.