Sensex up 300 points; regains 20000 on rate cut hopes

The BSE Sensex broke above the psychological 20,000 mark on Wednesday as banking stocks surged on hopes that the Reserve Bank will cut rates in June after April inflation eased to a 41-month low.

The Sensex surged 310 points to 20,032, while the Nifty advanced 92 points to 6,087 as markets rallied as of 10.30 a.m. The rupee also edged up against the dollar at 54.71.

The Bank Nifty surged over 2 per cent as lenders such as ICICI Bank gained after RBI Governor Duvvuri Subbarao said he would take note of falling inflation when discussing potential interest rate cuts.

ICICI Bank gained 2 per cent while HDFC Bank traded over 2 per cent higher. Public sector lenders such as Punjab National Bank and State Bank of India also saw strong buying interest.

Other rate sensitive stocks such as autos and realty also rallied. Tata Motors shares were up 2.5 per cent after its unit Jaguar Land Rover Ltd reported a 12 per cent increase in sales in April on Tuesday, raising expectations the more important wholesales numbers would improve.

47 stocks traded higher on the Nifty led by Reliance Infra, which gained over 3 per cent. The Anil Ambani firm reported higher than expected net for the March quarter. Drug maker Lupin and mortgage major HDFC also traded with over 3 per cent gains.

Ranbaxy Labs, which has reached a $500 million settlement with the U.S. for selling adulterated drugs and lying to federal regulators, was the top Nifty loser. It traded 0.3 per cent lower.