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Sharp rally in most of the sectors paved the way for both the key indices, Sensex and Nifty, to hit a nearly 16-month highs and improved further by about three percent during last week, stimulated by a host of positive factors.

Sensex was in the vicinity of 17000 mark, while Nifty pierced through the 5000 mark during the intra-week trade.

After moving in a range of 16,820.02 and 16119.95 points, the Bombay Stock Exchange 30-share index ended the week at 16,741.30, the level not seen since May 22, 2008, a rise of 477.00 points or 2.93 percent over its previous weekend close.

The broader 50-issue Nifty of the National Stock Exchange touched a high of 5,003.05 before concluding the week at 4,976.05, a net gain of 146.50 points or 3.03 percent.

Reports of higher advance payments by some big corporates for the second quarter, indicating revival in the economy amid heavy portfolio inflows, mainly boosted the market sentiment.

Firm global cues also helped local bourses to keep the tempo upbeat. Most of the world markets closed the week up on encouraging rise in U.S. retail sales in August and hopes of global economic recovery after the U.S. Federal Reserve Chairman, Ben S Bernanke, said the worst U.S. recession since the 1930s has probably ended.

Signals by Reserve Bank of India not to hike interest rates till the economic recovery is on a strong footing, too supported the market.

Interest rate is likely to be hardened by current fiscal, according to C Rangarajan, Chairman of the Prime Minister’s Economic Advisory Council.

Rangarajan said that though capital flow had improved, but were not of the same order as two years ago. Nevertheless, inflows through foreign direct investment (FDI) and foreign institutional investment (FII) would be larger this year compared with last year. The fiscal actions involving a cut in excise duty and enlarging government expenditure is likely to stimulate aggregate demand. The government has already extended its stimulus package up to March 2010, which could be reviewed thereafter.

In the case of central fiscal deficit, Rangarajan said, “We should revert to fiscal responsibility and budgetary management (FRBM) targets as the economy began to recover. He does not envisage any increase in the 2009-10 fiscal deficit, which is pegged at 6.8 percent of the gross domestic product (GDP).”

RBI had taken right steps by reducing CRR (cash reserve ratio) and repo and reverse repo rates for expanding liquidity. However, it was being pointed out that the actions of the central bank have not percolated to the ground level and credit growth was slow. He envisaged that India would see ‘definite signs’ of recovery in the second half of 2009-10 and the economy would grow between 6 and 6.5 per cent. Fiscal 2010-11 would see a distinct improvement and the economy would grow between seven and eight percent. But to go back to nine percent growth, the country has to wait for the world economy to improve and the world trade to pick up.

According to Rangarajan, the shock waves produced by the current financial crisis would have their own effect on the structure of capitalism. Acceptable capitalism would require more regulations. Future discussions must centre around the nature and scope of such regulations.

Bangalore: Indian stocks emerged as the best performers by giving investors the highest return of nearly 60 percent in 2009 so far. It has outperformed its global peers, including the U.S., the U.K. and China, which gave returns of 2.33 percent, 10.17 percent and 36.77 percent respectively.

According to an analysis of MSCI Barra indices, Indian stocks have provided a return of 59.30 percent year-to-date, against 34.37 percent gains provided by MSCI Barra’s emerging market index, covering all developing nations.

Among the emerging BRIC (Brazil, Russia, India and China) nations, the Brazilian and Russian markets seemed to be slight closer competitors with gains of 56.89 percent and 41.61 percent respectively in the year so far.

The 30-share benchmark index of Indian stocks, Sensex, gained over 5,000 points in the year so far to settle at 14,764.64 points on June 26 compared to 9,600 levels on December 31, 2008.

Other emerging markets which gave over 50 percent returns so far this year include Indonesia with 55.85 percent and Chile with 51 percent.

Analyst believed that the decisive mandate in favor of Congress-led UPA in the recently concluded general elections helped Indian markets to rise on the positive global cues.

An analyst from a leading brokerage said, “The Indian stocks have been on a recovery path primarily in the past three months due to election results and on expectation of new government spurring the economic reforms in the country in the days to come.”

Meanwhile, other developed markets including Canada gave 25 percent returns, Sweden (21.42 percent), Norway (24.70 percent) and Japan (2.45 percent), according to the data.

Further, Indian stocks have also performed significantly better in the past three months by period up to June 26 and have given foreign investors returns of 62 percent.

Mumbai: In what was the biggest gain in a single day since Oct 31, 2008, a key index of the Indian equities markets soared more than 700 points, raising hopes that the rally that has kept the bourses in green for eight-nine weeks can be sustained.

The 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE), which opened at 11,635.24 points, rose 731.5 points or 6.41 percent from the previous close to end trade at 12,134.75 points.

Similarly, the S&P CNX Nifty of the National Stock Exchange (NSE) gained 4.96 percent to close at 3,646.35 points.

Broader market indices also gained, with the BSE midcap index moving up 3.91 percent, while the BSE smallcap index was up 3.57 percent.