Continuous buying by foreign institutional investors saw the BSE Sensex close at an all-time high of 21,033.97, up 105 points or 0.5 per cent on Wednesday. This is only the second time the BSE Sensex has closed above the 21,000 mark.

Short-covering ahead of expiry in the derivatives segment also lifted the benchmark indices. The rally was despite the RBI tightening rates on Tuesday.

On November 5, 2010, the Sensex had closed at 21,004.96. However, the all-time intra-day high of 21,206.77 recorded on January 10, 2008, is yet to be breached.

On Wednesday, the Nifty closed at 6,251.70, up 31 points or 0.5 per cent, 60.75 points shy of its all-time closing high of 6,312.45 recorded on November 5, 2010.

Arun Kejriwal, Founder, KRIS Research, said: “Though the markets are almost near their life-time highs, they do not reflect reality. The movement has been restricted to a limited number of stocks and this has taken away the smile from the faces of retail investors as most have not recovered their cost of capital.”

The rally was led by FMCG and pharma scrips. Mid- and small-cap stocks did not participate the way they did in 2008.

Daljeet Singh Kohli, Head-Research, IndiaNivesh, said: “It will take at least another two quarters for revival of economic and corporate fundamentals. However, the markets will move up if we keep getting liquidity. It is not advisable to have more than 10 per cent of one’s portfolio exposed in such a scenario and it is best to avoid turnaround stories, highly leveraged companies and those with very high valuations (PE).”

Nomura’s Economist Sonal Varma expects another 25 basis points hike in the repo rates to 8 per cent by March 2014, followed by a prolonged pause.

FIIs notched up a volume of over Rs 4,800 crore, buying equities worth Rs 1,017 crore in the net. Domestic institutional investors offloaded net equities worth Rs 551 crore while retail investors on the BSE also were net sellers for Rs 65 crore.

(This article was published on October 30, 2013)
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