Indian shares hit new peak on foreign buying

MUMBAI (AFP) - India s benchmark stock index raced to a new record high as foreign investors bought shares on hopes that a new pro-business government would emerge from elections which start next month.

The Bombay Stock Exchange s (BSE) benchmark index gained 1.06 percent to touch a lifetime high of 22,040.72 points in morning trading.

"Foreign institutional investors are buying, expecting the new government post-elections to be a stable and reform-focused one," an equity analyst told AFP requesting anonymity.

The momentum in markets could last till April with election results in May providing the next set of cues, the analyst said.

India s Hindu nationalist Bharatiya Janata Party, seen by business as better able to get the economy back on track, is tipped to win the elections due in April-May, defeating the scandal-tainted ruling Congress party.

Growth slackened last year to a decade low of 4.5 percent and the government expects 4.9 percent expansion in this fiscal year to March 31.

The results of the general election, to be held in phases, are due in mid-May.

Foreign institutional investors have purchased $7.4 billion in local equities and debt so far in the fourth quarter of the current fiscal year, data from the Securities and Exchange Board of India showed.

The BSE index later trimmed some gains to trade up 0.50 percent at 21,919.29 points.

Some analysts were sceptical about a stock market surge.

"We believe shares are in an extended overbought position, said Rahul Bhandawat, an equity analyst at Mumbai s Equentis Capital.

"Cues from Crimea and the US Federal Reserve decision should not be overlooked, given our linkages with the world economy," Bhandawat added.

Western leaders have announced sanctions against Moscow after Crimea s vote to leave Ukraine and join Russia on Sunday.

Meanwhile, the US Federal Reserve is expected to further scale back its economic stimulus as the world s biggest economy shows signs of stable recovery.