Sensex rises 207 points on rate cut, ADAG stocks soar
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The BSE Sensex witnessed its biggest point gain in over a fortnight on the back of a deeper than expected cut in repo rate by the Reserve Bank Tuesday.
Markets had factored in a 25 basis point rate cut in repo rate, which is the rate at which the central bank lends to banks. However, the central bank cut repo rates by 50 basis points to 8%. Governor D Subbarao cited deceleration in growth and moderation in inflation behind the rate cut move.
The BSE Sensex rose 207 points or 1.2% to close at 17,358 while the broader Nifty index advanced 63.50 points to 5,289.70.
Though sentiments improved, profit booking in rate sensitive stocks, especially banks, was witnessed. Banks (0.8%) and auto (0.8%) closed off the day's high. There was some disappointment by the central bank’s commentary that indicated there was little headroom for further rate cuts going ahead.
“This (rate cut) is unlikely to be followed by too many rates cuts as inflation is still high… this was one golden opportunity for the RBI to boost market and biz sentiment…” Ajay Mahajan, founder at FICC Capital told NDTV Profit today.
However, the realty index soared 2.4%, outperforming all other groups of stocks on the BSE. A fall in interest rates would make home loans cheaper and increase the demand for property. DLF, India's biggest real estate player, gained nearly 3%.
On the Nifty, shares of Anil Ambani-promoted firms - Reliance Infra (6.3%), Reliance Communications (5.5%) and Reliance Power (3.7%) were the top gainers.
Government owned oil explorer ONGC (3.8%) and Infra and cement major Jaiprakash Associates (3.6%) also saw good traction.
Coal India (3.2%) rose after the board of directors said it will sign Fuel Supply Agreement with power firms with a significantly reduced penalty in case of supply shortfall.
Vedanta Group firm Cairn India (-1.2%) was the top Nifty loser today. IT major HCL Tech (-0.8%) closed lower ahead of reporting quarterly numbers tomorrow.
European stocks traded higher today though Asian markets closed lower on rising Spanish bond yields concern.
The market breadth was positive with 66% stocks rising on the broader BSE 500 index.