News Column

Sensex rises to record options prices soar too

May 9, 2014

Bloomberg News

Mumbai: Indian stocks rallied, with the benchmark index rising to a record, on speculation election results next week may show a victory by the main opposition party. Option prices climbed to the highest level since 2009.

ICICI Bank advanced to six-year high, sending an index of lenders to a record. Maruti Suzuki India rose the most in seven weeks.

India VIX, which measures the cost of options on the CNX Nifty Index, surged to the highest level since August 2009 as traders bet exit polls early next week and results May 16 will heighten the market swings.

The S&P BSE Sensex rallied 2.9 per cent to an all-time high of 22,994.23 at the close. The gauge rose for a third month in April as investors bet a win by Bharatiya Janata Party'sNarendra Modi will allow him to boost economic growth from the lowest in a decade.

Foreigners bought a net $88 million of local shares on May 8, a 13th day of purchases, data compiled by Bloomberg show.

"There's basket-buying happening and this rally will garner more legs as May 16 approaches," Alex Mathews, head of research at Geojit BNP Paribas Financial Services, said. "Funds are building positions in frontline stocks ahead of the exit polls."

The Sensex has climbed 17 per cent since September 13 when the BJP named Modi as its prime minister candidate. The rally may extend if the party and its partners win more than 266 seats, approaching the 272 required for a majority, according to a Bloomberg survey of 19 brokers and investment advisory firms.

Rakesh Arora, head of research at Macquarie Group in Mumbai and the most accurate forecaster for the stock gauge in 2013, said in a Bloomberg survey last month his year-end Sensex target of 23,900 may "prove conservative" if Modi comes to power. Foreigners bought $5.6 billion of shares this year, the second-most after Taiwan among 18 nations tracked by Bloomberg.

Hedge funds buying

There is buying by overseas hedge funds," Jitendra Panda, head of broking at Capital First, said by phone from Mumbai. There's optimism a stable government will speed up economic reforms, benefiting companies in power and capital goods sectors, he said.

Prime Minister Manmohan Singh'sCongress party looks set for its worst-ever electoral performance as voters punish the government for graft scandals, Asia's fastest retail inflation and slowing growth. Projects worth $230 billion are awaiting clearance as lawmaking stalled in the Congress-led coalition, data from the Cabinet Committee on Investment show.

ICICI Bank surged 7.0 per cent to the highest level since January 2008. HDFC Bank rose 5.3 per cent.

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Source: Times of Oman

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