Sensex surges 312 points as Fed rate cut lifts sentiments

Written by Markets Bureau | Mumbai, May 2 | Updated: May 4 2008, 05:02am hrs
Ignoring a spike in the inflation rate, Indian indices posted handsome returns on Friday as a 25 basis points (bps) cut in key interest by the US Federal Reserve on Wednesday lifted investor sentiments.

The 30-share Bombay Stock Exchange (BSE) Sensex, after opening with a positive gap, remained in positive terrain for the entire trading session before closing at 17,600 point, a rise of 312.81 points or 1.81% while the broader Nifty of the National Stock Exchange (NSE) closed at 5,228.20, gaining 62.3 points or 1.21%.

For the fourth consecutive week, the markets managed to close on a positive note. For the week ending on May 2, the Sensex gained 584.16 points (up 3.4%) while the Nifty added 132.55 points (up 2.7%).

On Friday, inflation based on the wholesale price index soared to its highest in past three and a half years to 7.57% for the week ending April 19, 2008, as against 7.33% in the previous week. However, experts believe that a sharp appreciation of the dollar against euro on Thursday will keep the rising commodities prices in control in the weeks to come. This may prompt the RBI to keep interest rate unchanged.

All these developments, coupled with better-than-expected profits posted by the State Bank of India revived investors interest in the sector on Friday which had witnessed some profit-booking in the past week. The BSE Bankex added 322.50 points or 3.66% to end at 9,142.18 points.

Ambreesh Baliga, VP, Karvy Stockbroking, said, Despite a rise in inflation, we saw a rally on Friday and this is a matter of concern. We are expecting a correction in the days to come. We are really cautious of the markets and advising our clients to book profits at current level as we feel the rally we have seen recently is difficult to sustain.

Barring BSE Metal, all other sectoral indices ended the day on a positive note on Friday.

Concerns of declining margins by some metal companies forced investors to book profits in the sector. Prominient losers in the metals sector were Nalco, Sterlite and Hindalco. The BSE Auto, Realty, IT and CG surged by more than 2%.

The number of advances as against declines remained almost equal at the BSE, with 1,400 stocks advancing as against decline by 1,301 and 67 remained unchanged.