The BSE Sensex edged higher on Tuesday, sending the index to a 8.9 per cent annual gain and a record high this year, as foreign investor flows offset widespread concerns about a domestic economy suffering from low growth but high inflation.
Foreign institutional investors bought a net $20.1 billion worth of shares so far this year, according to provisional regulatory data, marking a second consecutive year of purchases after their $24.5 billion in 2012.
The strong foreign buying concentrated on exporters such as Tata Consultancy Services Ltd (TCS) and Sun Pharmaceutical Industries Ltd that were the top gaining shares this year. TCS and Sun Pharmaceutical benefited as the rupee hit a record low in late August.
However, analysts worry those foreign flows could ebb, leaving Indian shares exposed at a time when concerns about the economy abound, while the country faces the prospect of uncertain general elections due by May.
"Given the deceleration the growth and the various issues we faced this year, I think the year ended reasonably well compared to what we were thinking at one point of time," said S. Naren, chief investment officer of ICICI Prudential Asset Management Co.
"If after the elections the foreign investor believes that growth dynamic will improve, India will remain one of the best countries for a secular growth story would, so I think whether their will be substantial flows would depend on the election outcome
The Sensex closed at 21,170.68, up 27.67 points for the day.
For the year, the Sensex rose 8.9 per cent, compared with a 25.7 per cent gain last year, a middle-of-the-pack performance in local currency terms for Asia-Pacific exchanges, according to exchanges tracked by Thomson Reuters.
However, in dollar terms, the index rose only 3.2 per cent for the year due to an 11 per cent plummet in the rupee, making the index the region's seventh worst performer as per Thomson Reuters data.
The Nifty held 0.21 per cent on the day to end at 6,304, advancing 6.8 per cent this year.
Exports dependent software service providers and pharmaceutical companies were the top performers this year, with many shares hitting a record high, benefiting from the weak rupee and growth recovery in the United States and Europe.
HCL Technologies shares doubled this year, while Tata Consultancy Services, and Wipro Ltd surged 73 per cent and 61.3 per cent, respectively.
Infosys Ltd shares surged 50.3 per cent in 2013.
Sun Pharmaceutical Industries Ltd and Lupin Ltd rose over 54 per cent and 47 per cent respectively for the year.
On Tuesday, blue chips were the leading gainers, with Reliance Industries Ltd closing up 0.91 per cent, Tata Motors Ltd ending 0.4 per cent higher and Tata Consultancy Services gaining 0.7 per cent.
Shares of India's Apollo Tyres Ltd surged 5.77 per cent after a deal to acquire U.S.-based Cooper Tire & Rubber Co fell through late last night.
Cement makers recouped some losses as Monday's sell-off over worries about weakening cement prices was seen overdone: ACC Ltd ended up 1.3 per cent and Ambuja Cements Ltd rose 0.4 per cent.
Shares in supermarket chain Trent Ltd rose 0.4 per cent a day after the foreign investment regulator approved a $110 million investment plan by Britain's Tesco.