Japan stimulus turbocharges-- GLOBALLY..!!!

Bank of Japan stimulus turbocharges market

Sensex, Nifty gain 1.9%, most since May 12

BS Reporter  |  Mumbai  

October 31, 2014 Last Updated at 18:12 IST

The Indian market on Friday soared nearly 2% -- most since Narendra Modi got elected as Prime Minister -- after The Bank of Japan (BOJ) announced huge stimulus programme, stoking a rally in global stocks.

In an unexpected move, the Japanese central bank raised its annual bond buying target to $725 billion (80 trillion yen), up from 60-70 trillion yen. Japan also increased equity holding limit of foreign shares for its pension funds from 12% to 25% of their portfolio.

Japan's benchmark Nikkei index soared 5%, while the yen fell to seven-year low against the dollar. Most Asian market ended with more than 1% gains, while the European markets too opened strong.

Gaining for a fourth straight day, the benchmark Sensexclosed at 27,865.83, up 519.5 points, or 1.9%. The NSENifty closed at 8,322.2, up 1.87 per cent, or 153 points, most since May 12 (last day of polling of the general elections). Both the indices scaled new record highs for a second straight day.

The rupee strengthened against the dollar, while international gold prices dropped over 2% on Friday.

"Bulls have once again taken charge. The large-than-expected quantitative easing programme announced by Japan, has boosted sentiment," said UR Bhat, managing director, Dalton Capital.

The fresh stimulus package by BOJ came on the day the six-year US stimulus, or bond-buying programme came to an end. Investors hoped that the Japanese central bank's action will make up for any shortfall that the US's quantitative easing is likely to create.

"This is a short burst of euphoria. The action by BOJ acknowledges that the global economy continues to remain weak. Next the central bank for Europe will announce stimulus," said Saurabh Mukherjea, CEO-Institutional Equities, Ambit Capital.

Foreign institutional investors (FII) pumped in Rs 1,754 crore into Indian stocks on Friday, taking their two-day investment tally above Rs 3,000 crore.

The Indian market have rebounded a sharp 7% from its monthly low touched in mid-October. The reversal in the market fortune has come on the back of reform initiatives taken by the government and also improving global investor sentiment.

Deutsche Bank on Friday upped its Sensex target to 29,000 for March 2015 "on intensifying policy action". Abhay Laijawala, managing director and head of research at Deutsche Equities India in a note said aggressive reform-oriented policies will emerge as a core catalyst for the Indian market.

After a period of intense volatility, during which FIIs pulled out over $1 billion from the Indian market (between September 16 and October 17), overseas investors have once again turned aggressive buyers, pumping in Rs 5,500 crore in the last nine trading sessions. Interestingly, the mutual funds have been consistent buyers this month having invested more than Rs 5,000 crore in stocks in October.

Experts said that the stimulus packages announced by the global central bank largely have a neutral impact on India.

"Stimulus packages are neutral for India. On one had they help equities but on the other hand they also put upward pressure on the commodity prices. India's fortunes are more linked to its fundamental story. And India is on the path of becoming a healthy robust economy. We have bottomed up and are moving upward," said Mukherjea.

Analaysts said that the capital flows into the emerging market on account of Japan's stimulus package will not be as strong as US.

"While the stimulus by Japan can provide a counter balance to some extent but it cannot be as strong as the US stimulus. The money from US stimulus flows into all over the world including emerging markets. Japan's economy is not that international yet," said Bhat.

http://www.business-standard.com/article/markets/bank-of-japan-stimulus-turbo-charges-market-114103101144_1.html