Markets log new highs buoyed by jump in 'ease of doing business' ranking

Large caps outperformed broader market, gains driven by FPIs, which bought shares worth Rs 1,000 cr

Equities surged to record highs on Wednesday after India moved up several notches in the World Bank’s ease of doing business rankings. Investor sentiment was also boosted by optimism about global economic growth over data in the US and China, the world’s largest economies.  

The S&P BSE Sensex rose 1.2 per cent on Wednesday to 33,600 and the Nifty50 rose 1 per cent to 10,440. Banking stocks led the rally. Bharti Airtel rose by more than 8 per cent after the company said global investors had expressed interest in buying a stake in Bharti Infratel.

ICICI Bank, HDFC and SBI, which gained between 2.6 per cent and 4.6 per cent, contributed 218 points to the Sensex rally. Large caps outperformed the broader market and the gains were driven by foreign portfolio investors (FPIs), which bought shares worth Rs 1,000 crore on Wednesday. Overseas investor selling reversed in the past week after the government announced a stimulus plan, which included a Rs 2.11 lakh crore recapitalisation of banks and Rs 7 lakh crore investments in highway development.

Market players said the reversal in FPI selling, coupled with continued buying by domestic investors, was keeping the bullish sentiment alive despite high stock valuations. “In the absence of attractive alternatives (weak real estate and gold markets), domestic flows could be sustained, and the government’s reform agenda and growth recovery should also turn FPI sentiment incrementally positive,” said a research note by Citibank.

Asian shares hit 10-year highs on Wednesday, with Japan and South Korea leading the gains. Oil prices rose on hopes that major producers would maintain their output cuts. US indices ended October with their biggest monthly gains since February. 

The gains in risky assets were spurred by US consumer confidence in October rising to a 17-year high and China's Purchasing Managers' Index for October meeting expectations.

A report released on Tuesday after market hours showed India had jumped 30 places to 100 among 190 countries in the World Bank’s ease of doing business rankings, driven by measures in the country to make it easier to secure credit, pay taxes and resolve insolvency.

"Transparent and supportive government policies are key to encouraging businesses. The improvement in India's ranking in ease of doing business highlights efforts made by the government in this direction. This will attract foreign investment into India," said Jaideep Arora, CEO, Sharekhan.

The report ranked India among the top 10 “improvers” globally, having done better in 8 out of 10 business indicators.

“During the past year, India has made major progress in the areas of paying taxes and resolving insolvency, with measures including an online portal to ease the corporate tax process and a new bankruptcy code,” said Sonal Varma, analyst at Nomura, a foreign brokerage.

The benchmark indices have gained more than 25 per cent in the year to date, making India one of the best performing markets globally.

Market players said global investors would now await the outcome of the US Federal Reserve’s two-day policy meeting. The US central bank is expected to leave interest rates unchanged.