Buoyant Indian shares cruised past 20,000 points on Tuesday for the first time in 32 months, but there were signs of fatigue after the market had climbed for 10 of the last 11 sessions. A tidal wave of foreign buying, triggered by the country's robust economic growth while the developed world struggles with a slowdown, has made Indian equities the preferred destination for global investors.
-- Foreigners buy over $3 billion of stocks this month
However, after rallying 11.3 percent this month investors are eager to lock in profits and the possibility of consolidation is growing. "Clearly, the pace at which the rally has been happening over last 15 days is unsustainable. But broadly the longer-term or medium-term bullish direction is going to be maintained," said Raamdeo Agrawal, co-founder and director of Motilal Oswal Financial Services. The 30-share BSE index rose 0.48 percent or 95.45 points to 20,001.55, with 14 of its components gaining. It rose as much as 0.9 percent to 20,088.96, its highest since January 2008.
Six of the blue chips - Tata Consultancy Services, Infosys Technologies, ITC, Tata Motors Mahindra & Mahindra and HDFC Bank - hit all-time highs. So far in 2010, foreign portfolio investments have surged to $16.2 billion, with more than $3 billion coming this month. The inflow has lifted the benchmark index 14.5 percent in the year to date, beating peers in Brazil, Russia and China.
Finance Secretary Ashok Chawla told reporters in New Delhi that there were no signs of overheating in the market. "The Securities Exchange Board of India are watching the capital markets. There is no cause for worry or anxiety at this point in time," he said on television channel CNBC-TV18.
A Reuters poll of 21 market participants conducted last week had expected the BSE index to touch 20,080 by end-2010, and the market's exuberance has caused unease among some investors. More than two shares declined for every share that gained in the broader market in relatively higher volume of 503 million shares.
Analysts are, however, optimistic about the outlook for foreign inflows. BNP Paribas Securities said the potential for further fund flows into India is significant, as global funds are just about beginning to increase their allocation to Asia's third-largest economy.
The brokerage said any market correction could attract cash-rich insurance companies to Indian stocks. Export-driven software services firms shrugged off tougher US rules against outsourcing and closed higher. TCS rose as much as 5.1 percent to 957 rupees and Infosys climbed nearly 2 percent to 3,065, both record highs.
Top engineering and construction firm Larsen & Toubro closed 1.8 percent higher, after Credit Suisse raised its target price on the stock to 2,288 rupees from 1,969, while maintaining an "outperform" on the stock. The 50-share NSE index rose 0.5 percent to 6,009.05 points.