|The benchmark indices posted their third straight weekly gains, after investor sentiment improved following a sharp drop in crude oil prices.|
Stability in the rupee saw foreign institutional investors (FIIs) turn net buyers on all five trading sessions of the week.
The Sensex gained 0.6 per cent or 197 points to 35,457, while the Nifty rose 0.6 per cent or 65.5 points to 10,682, led by gains in index heavyweight Reliance Industries (RIL) and HDFC.
Meanwhile, YES Bank dropped 7 per cent after analysts raised concerns on the stock, following the resignation of O P Bhatt from the search panel to find a new chief executive officer.
Analysts say the latest surge in the markets has been triggered by a slide in the price of crude. Brent crude oil has tumbled 22 per cent from to $66 a barrel from $86 a barrel at the start of October.
Experts said the drop in oil prices has significantly eased the macroeconomic headwinds for India.
"India's macroeconomic position appears to have stabilised with crude prices slipping to below $70 per barrel. We see stable rupee and interest rates and a manageable fiscal position over the next few months if crude oil prices were to remain below $75 per barrel," said Sanjeev Prasad, managing director and co-head, Kotak Institutional Equities.
The rupee on Friday ended at 71.92 against the dollar, gaining over 3 per cent from its all-time low of 74.4. The yield for the 10-year benchmark government security softened to 7.81 per cent from a high of 8.18 per cent on September 11.
After sharp sell-off in the past two months, overseas investors were once again seen turning bullish on Indian equities. Foreign institutional investors (FIIs) bought shares worth Rs63.5 billion in the past five sessions, their highest weekly investment tally in many months.
"Stability in rupee and oil prices will provide direction to the market despite election led uncertainty," said Vinod Nair, head of research, Geojit Financial Services.
Eleven out of the 19 sectoral indices of the BSE gained on Friday.
"Macroeconomic factors have started to turn in favour of corporates. Massive fall in crude oil and the rise in rupee will have a double impact on the cost structures, it will boost companies such as OMCs, aviation and paints. Indian indices have quickly adjusted themselves to such macro dynamics and have been rising since the past three weeks, Jimeet Modi, Founder & CEO at SAMCO Securities
Shares of companies for whom crude oil is a key raw material have gained in recent weeks.
Prasad said the Indian market valuations are still on the higher side despite.
"Also, the valuations already factor in 15 per cent and 26 per cent growth in net profits of the Nifty-50 Index for FY2019 and FY2020. We find decent value in a few sectors and stocks in financials, energy, metals & mining and power utilities but do not find value in the 'quality' stocks. Also, it remains to be seen the high multiples will hold up in the event of tighter global monetary condition and higher bond yields," Prasad said.
The Nifty currently trades at nearly 17 times its one-year forward earnings estimate compared to historical average of about 15.5 times.