Indian stocks soar to record highs as economic recovery picks up

India’s key stock indices extended their winning streak to reach new record highs on Wednesday. The rally is driven by positive economic data and government plans to boost spending to secure further recovery from the pandemic.

The benchmark S&P BSE Sensex climbed over one percent and was on a path close above the 50,000-mark on Wednesday. Earlier in the trading session, it touched its all-time peak of 50,393 points. Similar gains were seen in the NSE Nifty 50 index, which reached a record 14,839 points.

Both indices marked their third straight session of gains this week. The latest rally was supported by the steady performance of India’s services sector, which expanded for the fourth consecutive month in January, with India Services Business Activity Index, compiled IHS Markit, rising to 52.8. While the index remains below its long-run average of 53.3 and employment is still weak, analysts at IHS Markit believe that the vital sector is set to extend gains.

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“The service sector looks set to sustain growth and confidence towards hiring may improve as Covid-19 concerns diminish,” said Pollyanna De Lima, the economics associate director at IHS Markit.

The Composite PMI Output Index, which combines performance in services and manufacturing output, also rose last month, finishing January at 55.8 compared to 54.9 in December.

Earlier this week, the Indian government published the much-anticipated annual budget, showing that it intends to spend big to boost the economy rattled by the coronavirus crisis. According to the nearly $500 billion plan, healthcare spending will be nearly doubled, while spending on infrastructure is set to go up by 35 percent. Another key measure, welcomed by the markets, was increasing the foreign investment cap for the insurance market.

“The mood of the market has changed completely since the budget announcement because of its positive tone ... FPIs [foreign portfolio investors] were net sellers before the budget and that trend has reversed [now],” Anita Gandhi, director at Arihant Capital Markets in Mumbai, said, as cited by Reuters.

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