Rajan fears behind, Street hugs reforms, sensex soar to 241 points

The 30-share index declined 178.03 points or 0.66 per cent to 26,447.88 with banking, consumer durables, FMCG, power, healthcare, metal and PSU sectot stocks leading the fall.

By: ENS Economic Bureau | Mumbai | Updated: June 22, 2016 11:14 am
Sensex plunged over 178 points in early trade today.

Contrary to expectations of a sharp sell-off on Dalal Street following the decision of Reserve Bank Governor Raghuram Rajan against taking up a second term, domestic stock markets on Monday bounced back from the initial setback and the Sensex closed with a gain of 241 points as worries over the exit of Britain from European Union receded and the government announced further liberalisation in more sectors.

Government-owned financial institutions came out in support of the market with huge buy orders in the opening session, preventing a major fall. While foreign investors pressed sales and pulled out Rs 537 crore in panic selling, FIs made net purchases of Rs 724 crore. Public sector LIC, which is the biggest investor in the stock market, and other PSU insurance companies and mutual funds were active in the market, sources said.

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Going ahead, Brexit will be an important event for the markets in the short term, analysts said. The benchmark Sensex plunged by around 200 points to a low of 26,438 points, but the huge orders triggered a rally and pulled back the markets. The sentiment was boosted by the recovery in other Asian markets and the Sensex rallied sharply to scale an intra-day high of 26,885.49 points before finishing at 26,866.92, showing a gain of 241.01 points or 0.91 per cent.

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According to analysts, a sharp rebound in Japanese stocks helped lead most Asian markets higher on Monday as worries eased about the coming referendum in the UK on European Union membership. The Nikkei Stock Average finished up 2.3 per cent, Shanghai 1.69 per cent, Korea 1.42 per cent and Hong Kong 1.69 per cent.

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“Today’s recovery in the market was because of there is less possibility of Britain exiting European Union,” Rajan said at a function here. Rajan, whose tenure as the RBI chief will end on September 4, had on Saturday said he will not be seeking an extension as the governor. Speculation was rife that the market will be battered in the wake of Rajan’s departure from the RBI in September.

However, the rupee fell by 23 paise to close at an over two-week low of 67.31 against the US currency on heavy dollar demand amid worries about the RBI Governor Raghuram Rajan’s decision against pursuing a second stint. The rupee fell to an intra-day low of 67.70 but recovered partially later.

Dipen Shah, Senior Vice President, Kotak Securities, said, “markets ended the day higher despite the negative surprise of the RBI Governor leaving office after completing his term in September. Markets were bolstered by the expectations of a positive outcome from the Brexit poll. FDI relaxations by the government in several sectors buoyed sentiments that, reforms were continuing. The advance of monsoons has also helped the markets.”

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