The BSE Sensex today surged nearly 359 points to end at a three-year high after the Reserve Bank of India (RBI) enhanced liquidity for banks and expectedly hiked a key policy rate – ICICI Bank,State Bank of India (SBI) and HDFC Bank shares led the way.
Snapping its five-day losing run,the 30-share index closed in on the 21,000 mark on the back of massive buying in rate-sensitive banking,realty,auto and consumer durable shares. Investor wealth zoomed by around Rs 1 lakh crore on the BSE as overall 1,294 stocks closed with gains.
The BSE Sensex,which had lost 325 points in the past five sessions,shot up by 358.73 points,or 1.74 per cent to 20,929.01 after RBI Governor Raghuram Rajan announced the second quarter review of monetary policy 2013-14.
Market participants viewed the RBI’s move to increase the liquidity provided through term repos of 7-day and 14-day tenor from 0.25 per cent of Net Demand and Time Liability (NDTL) of banking system to 0.5 per cent as a big positive.
The central bank expectedly raised repo rate by 25 bps to 7.75 per cent while continuing to roll back MSF rate by 25 bps to 8.75 per cent on account of normalised forex situation.
“There was fear in the last few days that the RBI might go on a over-drive in its fight against inflation by hiking repo rate by 50 bps as against the consensus 25 bps hike. After the policy was announced,there was a relief on this front as well,” said Rikesh Parikh,VP – Institution Corporate Broking,Motilal Oswal Securities.
The 50-scrip National Stock Exchange index Nifty jumped up by 119.80 points,or 1.96 per cent to 6,220.90. Also,SX40 index,the flagship index of MCX-SX,closed 195.44 points or 1.60 per cent higher at 12,445.13.
Brokers said a better trend in the Asian region and higher opening in Europe further supported the sentiment. In Asia,the Sensex and the Nifty returned the best daily gains.
Sectorally,the BSE Banking index rose to nearly 1-month high by surging 4.35 per cent led by ICICI Bank,SBI and HDFC Bank shares.
The Realty sector was second best performer by rising 2.44 per cent,followed by Auto sector (2.43 pc) as Maruti Suzuki India spurted by 8.2 per cent after profit nearly tripled.
Sanjeev Zarbade,Vice President- Private Client Group Research,Kotak Securities: The Sensex opened on a sober note but rallied strongly post the monetary policy announcements. In its monetary policy meeting,the Reserve Bank of India (RBI) Governor Raghuram Rajan raised repo rate by 25 bps to 7.75 percent in the second quarter monetary policy review. The apex bank also rolled back MSF rate by 25 bps to 8.75 percent on account of normalised forex situation and also left CRR unchanged at 4 percent. In addition to this,the RBI also increased the liquidity provided through term repos of 7-day and 14-day tenor from 0.25 percent of NDTL of the banking system to 0.5 percent with immediate effect. The liquidity enhancement measure was taken as positive by bank stocks. Thus,ICICI Bank,Axis Bank and other private sector bank stocks were clear outperformers. Apart from this,Auto and Metal stocks were also trading firm.
Indian shares close near 3-year high after RBI policy; Fed key
* BSE index gains 1.74 pct; NSE ends 1.96 pct higher
* Maruti surges after July-Sept earnings beat estimates
* NSE bank index surges over 4 pct after RBI policy By Abhishek Vishnoi
(Reuters) BSE Sensex rose almost 2 percent on Tuesday,snapping a five-day losing streak to hit their highest close in nearly three years,as lenders surged after the central bank raised interest rates in line with expectations.
The Reserve Bank of India raised the repo rate by 25 basis points,its second consecutive monthly hike,while bringing down short-term interest rates. Some traders had feared the central bank would raise interest rates more aggressively to combat inflation.
Investors now await confirmation the U.S. Federal Reserve will stay on course with its $85 billion monthly asset purchase programme at its two-day meeting ending on Wednesday. Most predict the U.S. central bank will delay any stimulus tapering until at least March.
“This is more of a risk-on rally,which is ignoring the fact that RBI may hike rates further as growth picks up amid inflation,” said Aneesh Srivastava,chief investment officer at IDBI Federal Life Insurance.
The benchmark BSE index rose 1.74 percent,or 358.73 points,to end at 20,929.01,marking its highest close since November 2010.
The broader NSE index rose 1.96 percent,or 119.80 points,to end at 6,220.90,closing above the psychologically important 6,200 level.
The NSE bank index jumped 4.4 percent,marking its biggest single day percentage gain since September.
Real estate developers,DLF Ltd ended up 2.5 percent while Unitech Ltd rose 3.9 percent. Maruti Suzuki India jumped 8.1 percent,marking its biggest daily percentage gain since January 2012,after the country’s biggest carmaker reported July-September net profit tripled from a year earlier,beating estimates.
Cairn India Ltd rose 2.7 percent after Brent crude oil futures LCOc1 held within sight of a near one-week high as a sharp drop in Libyan oil exports rekindled worries over supply. Among stocks that fell,Ranbaxy Laboratories Ltd ended 0.6 percent lower ahead of its July-September earnings later in the day.
FACTORS TO WATCH
* Dollar index climbs as Fed meeting looms; Aussie falls
* Brent edges down but holds above $109
* Asian shares fall,dollar drifts ahead of Fed
* Foreign institutional investor flows