India's NSE index rose to a 15-1/2 month high on Monday, tracking gains in other Asian markets, after solid US jobs data bolstered expectations of an acceleration in US economic growth at a time of ultra-easy global monetary policy conditions. The broader NSE index rose 0.32 percent to close at 8,711.35, after hitting a high of 8,723.50, its highest since April 16, 2015, earlier in the session. The benchmark BSE index ended up 0.37 percent at 28,182.57.
Both the indexes posted their third straight session of gains. Although the strong July US payrolls data raised hopes for the world's biggest economy may have conclusively turned a corner after some volatile readings this year, investors expect the Federal Reserve will only raise rates in 2017 given that other countries are still cutting rates. Sentiment back home also remained supported by the passage of the long-awaited Goods and Services Tax (GST) Bill in the upper house of parliament last week, which paves the way for the rollout of the country's single biggest tax reform since independence.
Still, analysts said further gains could be constrained on valuations. The broader NSE index is valued at 20.71 times its estimated 12-month earnings, versus a multiple of 13.46 for the Thomson Reuters Emerging Markets Asia Pacific Index. Investors are also likely to take a pause ahead of the Reserve Bank of India's policy review on Tuesday where it is expected to leave rates unchanged.
"Today's gains are mainly due to positive US jobs report which has improved sentiment globally. Going ahead, we expect some consolidation or even correction as valuations have peaked-up," said Ambareesh Baliga, a Mumbai-based independent market analyst. Among the gainers, miners Hindalco Industries Ltd and Vedanta Ltd rose 4.3 percent and 1 percent respectively, tracking gains in London copper prices after solid US jobs reports boosted appetite for metals.
Oil refiner Hindustan Petroleum Corp rose 2.3 percent after the central bank on Friday raised the limit for foreign shareholding in the company to up to 40 percent from 24 percent. Housing Development Finance Corp rose 0.8 percent ahead of the Max Financial board meeting to discuss terms of planned merger with HDFC Life. But Union Bank of India fell 5 percent after the state-run lender's first-quarter profit plunged 68 percent on higher bad loans.