Sensex, Nifty hit 14-month highs

Mumbai: With the government sending out a bold message that there was absolutely no room for any rollback of the reforms process it launched last week, the Dalal Street turned euphoric.

The 30-share BSE Sensex soared 404 points to end the day at 18,752.83, up 2.20 per cent, while the broader 50-stock NSE Nifty jumped 137 points to close at 5,691.15, up 2.46 per cent.

"Sentiment was beaten out of shape, so this rally was expected. The strength in large caps indicates the rally will continue. Targets of 5,900-5,950 on Nifty are possible now," independent analyst Sarvendra Srivastava said.

On Thursday, the government went ahead with the notification of foreign investment in multi-brand retail, aviation and broadcasting sectors despite the nation-wide strike called by the opposition. Today, it went a step ahead and cut withholding taxes on overseas borrowings by local companies, sparking hopes that more reforms are in the offing to revive capital markets and also the overall economy.
The withholding tax cut boosted infrastructure stocks such as Larsen & Toubro, which are expected to especially benefit from easier access to overseas funding markets.

"Withholding tax cut is a significant thing as it reduces the cost of borrowing for corporates," said Sandip Sabharwal, chief executive officer for portfolio management services at Prabhudas Lilladher. "Whenever market sentiment improves and outlook on economy improves, normally, financials lead the rally.

Excessive allocation to defensives and cash is now getting reallocated," he added.

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