India shares hit record high as investors bet on Modi

June 6, 2014
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Indian opposition prime ministerial candidate Narendra Modi/AFP
Indian opposition prime ministerial candidate Narendra Modi/AFP

, MUMBAI, June 6- Indian shares closed at a record high Friday on investor optimism about economic growth prospects under the country’s new right wing government led by Narendra Modi.

The Bombay Stock Exchange’s benchmark index, known as the Sensex, closed up 1.51 percent at 25,396.46 points, eclipsing its previous lifetime high of 25,375.63 points hit on May 16.

Earlier in the day, it touched a lifetime intraday peak of 25,419.14 points.

“The government is talking in the right tones on reform and has also acted to show they mean business by abolishing (bureaucratic decision making) structures like empowered group of ministers,” said Shrikant Chouhan, head of technical research at Kotak Securities.

“The market is moving in anticipation that the upcoming budget will reflect concrete move towards reforms,” he said.

The change in government with the Bharatiya Janata Party — perceived as pro-business — taking charge last month with the first majority mandate in three decades has sparked an investor buying spree.

Finance Minister Arun Jaitley will present the budget in July, and has signalled his intent to boost growth while reining in government expenses.

“We must move towards an era of fiscal discipline where we can reduce the fiscal deficit, contain inflation and improve our growth rates,” Jaitley said last week.

Last weekend, Modi abolished the nine empowered groups of ministers and 21 groups of ministers, created by the previous Congress government during its decade in power, that were seen as a layer of red tape obstructing growth.

The economy has been stuck in low gear, growing by 4.7 percent year on year in the 12 months to March 2014 — the second consecutive year of sub-five percent expansion.

Chouhan forecast the Sensex would climb to 27,000 points in coming months if the government’s actions live up to investor expectations.

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