The News International Team
The surprise rate cut by Reserve Bank of India on Thursday boosted equity benchmarks indices 2.6 percent, the biggest percentage gain since May 9, 2014. Not only short covering but also fresh buying by FIIs in banking & financials and index heavyweights led this magnificent rally.
The 30-share BSE Sensex reclaimed the 28000-mark today, up 728.73 points at 28075.55. After hitting the 8500-level, the 50-share NSE Nifty closed tad below it, up 216.60 points at 8494.15.
The broader markets underperformed benchmarks with the BSE Midcap and Smallcap indices rising a percent.
The Reserve Bank of India slashed repo rate (at which the RBI lends money banks) by 25 basis points to 7.75 percent and kept the cash reserve ratio unchanged at 4 percent. This is the first rate cut by RBI in last 19 months. Rockstar RBI Governor Raghuram Rajan has said that inflation is likely to be below 6 percent by January 2016. Finance Minister, Arun Jaitley welcomes this move, saying rate cut will lead to more money in hands of consumers.
The market veterans cheer the rate cut, saying this may be an indication of beginning of rate cut. Raamdeo Agarwal of Motilal Oswal says rate cut will give major growth momentum to the economy. Nirmal Jain of IIFL says this is an inflection point for the market while Rakesh Arora of Macquarie expects an incremental 75 bps cut in 2015.
After rate cut, United Bank of India was the first to cut base rate to 10 percent from 10.25 percent w.e.f February 1.
The rupee also gave a salute to rate cut, strengthening past 62 per dollar intraday today. The currency closed at 62.06 a dollar, up 12 paise compared to 62.18 a dollar in previous session.
All sectoral indices closed in the green with the BSE Realty leading the chart, rising 8 percent. Bank Nifty ended the day at record closing high of 19,235.65, up 3.40 percent. BSE Auto, Capital Goods, FMCG, Metal, Oil & Gas and Power indices gained 1-2 percent.
India’s biggest lenders State Bank of India and ICICI Bank gained 5 percent each while its rival HDFC Bank and Axis Bank were up 2.6 percent each. DLF was the top Nifty gainer with 11 percent rally followed by HDFC and IDFC with 7 percent upside.
Index heavyweights ITC, Reliance Industries and Larsen & Toubro climbed 2.8-3.6 percent. while Wipro and TCS gained more than a percent ahead of third quarter earnings.
Bajaj Auto spiked over 2 percent after reporting better than expected earnings in the quarter gone by. Profit fell 4.8 percent year-on-year to Rs 861.2 crore in Q3FY15 as against forecast of 6 percent fall.
Meanwhile, Telecom Regulatory Authority of India (TRAI) rejected Department of Telecommunications’ proposal for higher 3G price of Rs 3,899 crore and reiterated its old stance on 3G spectrum price. Bharti Airtel and Idea Cellular gained 0.8 percent each while Reliance Communications climbed nearly 4 percent.
Atul gained 3.55 percent as US FDA has approved its Dapsone manufacturing facility in Valsad, Gujarat.
Wipro, Reliance Industries will be closely watched on Friday as both will announce their third quarter earnings.
Also look out for SpiceJet as it announced that Kalanithi Maran and KAL Airways decided to transfer ownership, management and control of the low cost carrier to earlier promoter Ajay Singh. The stock gained 3 percent. Kalanithi Maran and KAL Airways holds 53.48 percent stake in the company as of September 2014.
Globally the markets were mixed. Asian markets closed higher with the Shanghai and Nikkei rising 1-2 percent. However, European markets erased all early gains, falling marginally. Swiss stocks fell 8 percent after Swiss National Bank discontinued minimum exchange rate and lowered interest rate to -0.75 percent.
About 1720 shares advanced while 1182 shares declined on the Bombay Stock Exchange.