Benchmark indices rose to fresh all-time highs on Wednesday, driven by automobile, capital goods and realty stocks after the Reserve Bank of India (RBI) cut the liquidity ratio requirement for banks and left interest rates unchanged ? in line with expectations ? at its bi-monthly monetary policy review.
The Sensex settled at a new high of 24,858.59, up 173.74 points or 0.7%, while the Nifty ended at a record 7,415.85, up 53.35 points or 0.72%. Broader markets also saw buying interest, with the BSE Mid-Cap and Small-Cap indices ending up in the range of 0.6% to 1.2%.
Foreign as well as domestic institutional investors were net buyers on Wednesday as the Street was positively surprised after central bank governor Raghuram Rajan cut statutory liquidity ratio (SLR) by 50 bps to 22.5%, but, more importantly, adopted a more neutral and dovish stance to the monetary policy.
Overseas funds net purchased $97.14 million worth of shares in the cash markets whereas their domestic counterparts bought $16.86 million (Rs 99.81 crore), showed provisional data from stock exchanges. Foreign institutional investors’ (FIIs) buying reached $8.2 billion so far this calendar, the most among eight Asian markets tracked by Bloomberg.
The RBI said further policy tightening won?t be warranted if consumer-price inflation stays on course to hit 8% in January 2015 and 6% a year later. If disinflation is faster than anticipated, ?it will provide headroom for an easing of the policy stance?, it said.
?RBI, as expected, kept the rates unchanged, providing stability to the market. Significantly, the commentary is dovish. The two measures taken to reduce the SLR and export re-finance are long term in nature and unlikely to have any immediate relevance. The fact that this comes in the backdrop of a recent firm-up in inflation and RBI has conceded to give more weight to non-food-non-fuel inflation, can be viewed favourably,? said Motilal Oswal, CMD and cofounder, Motilal Oswal Financial Services.
Banking shares were little changed with the Bank Nifty ending down 0.19%. Ten out of 12 banks that comprise Bank Nifty settled in the red. IndusInd Bank was the biggest loser with a 2.36% decline. Most public sector banks ended down 0.5% to 1%, while private sector lenders, such as Axis Bank and ICICI Bank, ended with modest losses.
Real estate, automobile and capital goods shares saw immediate positive reaction. The BSE Realty index rose 3.15% to close at 1,981.79 ? its highest closing level in more than a year. Gurgaon-based DLF gained 5.2%, while Indiabulls Real Estate ended with 7.6% gains. The BSE Capital Goods index ended up 1.25%, led by Bharat Heavy Electricals (3.48%) and Larsen & Toubro (0.5%).
Separately, metal stocks were the highlight of the day as Odisha allowed eight iron-ore mines to reopen after the Supreme Court?s order. Tata Steel and Sesa Sterlite gained 6% each. Coal India ended with 5.3% gains and Hindalco advanced 3.33% from the previous close.