Indian share prices breached the key barrier of 8,000 points on Thursday to hit a new all-time high as hopes of robust corporate earnings offset worries about record oil prices, dealers said.
The 30-share benchmark BSE Sensex index rose 105.78 points or 1.33 percent to close at a historic 8,052.56, supported by domestic and foreign fund buying. Stocks rose across the board. The market has climbed 21 percent since the start of the year, mainly driven by investment of 7.79 billion dollars by foreign funds seeking to gain access to one of the world's fastest growing economies.
While a quarter of India's population of more than one billion people live below the poverty line, its growing middle class estimated at around 300 million has fuelled demand for housing, cars and consumer goods.
"Foreign fund buying has been the key trigger for the market much of the year. The clear signal is that valuations look attractive and second-quarter corporate earnings for Indian companies look strong," said Shitin Desai, executive vice-chairman of DSP Merrill Lynch.
The foreign investment figure is up 76.6 percent from the same period in 2004. This year Japanese and Korean funds have joined those from the United States, Europe and Southeast Asia in pumping money into Indian shares.
Finance Minister P. Chidambaram said there was no worry about a stock market bubble and despite the strong rise stocks did not appear to be overvalued.
Price/earnings ratios - a common measure of value - were around 14.5 to 15.5 times, Chidambaram told NDTV television. These levels suggest "there is no reason for concern or worry," he said.
"The buying momentum is expected to continue in coming sessions," said R. Balakrishnan, director of Parellex Consultancy Services.
India's economy is showing the fruits of a liberalisation drive launched more than a decade ago. It is forecast to grow by about seven percent for the financial year ending March 2006 and corporate earnings have been robust.
Among the biggest gainers were oil refiners following the government's decision to increase fuel prices by seven percent earlier this week to align them more with soaring global prices.
Dealers said the market could see profit-taking at higher levels but the undertone was firm.
"Considering these are historic highs, retail investors could book profits at these levels. Mid-sized stocks would be cheaper once a small correction comes in," said dealer Manoj Kakaiya with brokerage ULJK Securities.
Atul Hatwar, dealer with brokerage Crosseas Securities, said that in the wake of the devastation caused by Hurricane Katrina, the US Federal Reserve Board could keep interest rates steady rather than raise them as it had been doing.
"This should keep fund flows to emerging markets intact," said Hatwar.
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