BSE Sensex surges 257 pts as easing inflation spurs RBI rate cut hopes, but outlook is for status quo

Written by PTI | Mumbai | Updated: Jan 16 2014, 03:10am hrs
BSE SensexThe 30-share BSE Sensex rallied by a whopping 256.61 points, or 1.22 per cent, to end at 21,289.49.
All-round buying after wholesale inflation declined to a five-month low lifted the benchmark BSE Sensex today by nearly 257 points to its highest level since December 9 on hopes the RBI will lower interest rate to boost economic growth.

The NSE barometer Nifty also jumped over 79 points to reclaim the 6,300-point mark as it ended at 6,320.90.

Supported by gains in rate-sensitive banking, realty and auto sector stocks, the 30-share BSE Sensex rallied by a whopping 256.61 points, or 1.22 per cent, to end at 21,289.49, its highest closing since 21,326.42 on December 9.

Overall, 29 out of 30 Sensex-based scrips closed higher. HDFC Ltd and Larsen & Toubro (L&T) led the gainers, while Tata Steel closed flat. Other prominent gainers included Tata Motors, Hero MotoCorp, Bharat Heavy Electricals Ltd (BHEL), Sesa Sterlite and Cipla Ltd.

Yesterday, Sensex had lost 101.33 points on profit-taking.

Brokers said along with the rising trend in other Asian and the European markets after the World Bank raised its global growth forecast, wholesale inflation declining to a five-month low of 6.16 per cent in December, raised hopes that the Reserve Bank will ease interest rates and prop up growth.

However, profit-booking by some traders at higher levels, trimmed gains in some stocks, they added.

Shares of state-owned Coal India ended 1.81 per cent higher after the company declared an interim dividend of Rs 29 per share, or a record 290 per cent, for 2013-14. It had soared over 6 per cent in early trade.

Out of 13 sectoral indices, 10 barometers closed with gains between 0.37 per cent and 1.98 per cent.

The BSE Capital goods sector index rose 1.98 per cent, Banking index by 1.59 per cent, Realty index by 1.31 per cent and Auto index by 1.22 per cent.

Shares of Yes Bank ended 1.95 per cent higher after bank reported 21.4 per cent rise in net profit at Rs 415.6 crore for its third quarter ended December 2013. PTI SUN KPS DP KSR 01151625

Dipen Shah, Head- Private Client Group Research, Kotak Securities

Stock markets ended the day with more than 1% gains. The WPI data came in much lower than estimates and this supported the banking stocks, which ended sharply higher.

With the economic data already in, focus will shift to the quarterly results and the RBI policy meeting towards the end of the month.

Outlook on RBI Rates: The inflation and IIP data suggests that, despite growth not showing any signs of rebound, the core inflation continues to rise. This makes the case for a rate cut difficult in the near term. However, the sharp fall in the overall CPI and WPI inflation may result in a status quo from the RBI on January 28, especially with the subdued IIP data in the background.

BSE Sensex closes at 5-week high after WPI inflation eases

(Reuters) BSE Sensex rallied on Wednesday to mark their highest close in five weeks as rate-sensitive stocks such as ICICI Bank rose after data showing sharply easing inflation reinforced expectations the central bank will keep interest rates on hold.

Headline inflation eased to a five-month low of 6.16 per cent in December, helped by a softening in vegetable prices, data released Wednesday showed.

The drop in wholesale inflation came on the back of the fall in retail inflation to a three-month low, reinforcing expectations of a status quo by the Reserve Bank of India at its policy review meet on Jan. 28.

After raising interest rates by 50 basis points over September and October, RBI Governor Raghuram Rajan held rates steady last month, saying inflation data would largely determine the outlook for interest rates.

Gains also tracked higher Asian shares on Wednesday as the World Bank upgraded its outlook for the global economy, while the dollar extended gains in the wake of surprising strength in U.S. consumer spending.

"More upside can be seen in Indian equities, led by banking and consumer durable stocks as rate reduction chances are brightening. RBI has also managed growth and the currency part well," said Deven Choksey, managing director at KR Choksey Securities.

The benchmark BSE index rose 1.22 per cent, or 256.61 points, to end at 21,289.49, marking its highest close since Dec. 9.

The broader NSE index rose 1.27 per cent, or 79.05 points, to end at 6,320.90, closing above the psychologically important 6,300 level for the first time since Jan. 1. Rate-sensitive stocks led the gains after headline inflation eased.

ICICI Bank rose 2.1 per cent, while Housing Development Finance Corporation Ltd (HDFC) gained 2.7 per cent.

Among auto stocks,

Tata Motors gained 1.5 per cent, while Hero MotoCorp rose 1.8 per cent.

Software exporter Tata Consultancy Services (TCS) gained on optimism ahead of quarterly results on Thursday after Infosys surprised investors with a profit beat last week.

Tata Consultancy Services rose 1.2 per cent, while HCL Technologies gained 0.7 per cent. HCL Technologies Ltd may beat consensus earnings per share forecast for the October-December quarter when it reports results on Thursday, Thomson Reuters StarMine's SmartEstimates showed.

State-run Coal India gained 2.2 per cent after the company said on Tuesday it would pay an interim dividend of 29 rupees a share, or 183.2 billion rupees ($2.98 billion), in the current fiscal year.

Among stocks that fell, Ranbaxy Laboratories Ltd fell 2.4 per cent, slumping 11.6 per cent over three days after the U.S. Food and Drug Administration raised concerns about manufacturing practices at one of its factories.

Drugmaker Lupin Ltd fell 1 per cent after its competitor Allergan INC said a court ruled in its favour in a patent infringement case on a key drug.