Rate cuts,stimulus boost Sensex

Dalal Street rallied 3.2 per cent on Monday to its highest close in two months as rate cuts and an economic package...

Dalal Street rallied 3.2 per cent on Monday to its highest close in two months as rate cuts and an economic package to boost faltering economic growth boosted the sentiment. The BSE Sensex rose 317.38 points to 10,275.60.

Coordinated fiscal and monetary measures by policymakers to boost sagging growth and firm global markets boosted the domestic bourses,with the barometer Sensex breaching the psychological 10,000 mark.

Bank stocks rose on speculation falling bond yields and lower rates would accelerate loan growth and profitability. Metal stocks rose after the government withdrew exemptions from countervailing duty on TMT bars,used in construction activity,and withdrew exemption from basic customs duty on zinc and ferro alloys,which was provided earlier to contain inflation.

Shares of commercial vehicle makes rose as the government8217;s second stimulus comprised measures to boost sagging truck and bus sales in India. Infrastructure stocks rose after the government unveiled steps to make availability of funds to infrastructure projects.

Said Abheek Barua,Chief Economist,HDFC Bank,The fiscal and monetary stimulus package announced on Friday went somewhat beyond the market8217;s expectations. For one,the two sets of measures fiscal and monetary were not expected together and the fact that they were announced on the same afternoon assured the markets that monetary policy was more than willing to accommodate fiscal expansion.

The package is the best the government could have done in their current capacity/ fiscal position. However,implementation has always been Indias weak-link and will make the entire difference currently, said Saurabh Nanavati,CEO,Religare Asset Management Company Ltd.

Firm global markets supported the domestic bourses. European shares gained on Monday,with higher crude prices boosting energy heavyweights and US President-elect Barack Obama8217;s plans for tax cuts fuelling optimism. Key benchmark indices in Germany,France and UK were up by between 0.11 per cent to 0.52 per cent.