Global rally, lower inflation push up markets

Indian shares surged today as global markets rallied and wholesale inflation figures bettered market expectations.

The market, pressurised under a weakening rupee, found triggers in the improving US economy, where retail sales figures showed improvement and jobless claims came down. Inflation numbers continued their downward trend and added to the positive momentum in the market, said analysts.

The BSE Sensex was up 1.8 per cent, or 350 points, and closed at 19,177, while the NSE Nifty ended the day at 5808, up 1.9 per cent, or 109 points.

The 350-point gain in the BSE Sensex is the third highest single-day gain experienced by the index so far this year. During the week, a fast depreciating rupee kept shares under pressure, resulting in a 3.2 per cent decline in the Sensex till yesterday. Today's 1.8 per cent relief rally has pushed the decline up to 1.4 per cent. The rupee fell during the week by one per cent.

Market participants said the market saw a lot of short covering but not large-scale buying by investors.

Markets had been hit by a bevy of negative news in the last few days. This was a much required rally. There was a lot of short covering by participants today, but no large-scale buying was seen, said Sudhakar Ramasubramanian, managing director, Aditya Birla Money.

Market participants said the focus was on Reserve Bank of India policy. Expectations of a cash reserve ratio cut by the apex bank in its policy announcement next week pushed up bank stocks. The trigger of rate-cut expectations saw banking stocks move up. These shares had been beaten down quite significantly. So, at current levels, valuations are attractive, said Alex Mathew, head of research at Geojit BNP Paribas Financial Services.

Among the Sensex stocks, the top volume gainers were bank stocks like HDFC, SBI and ICICI Bank. Reliance Industries was up 3 per cent on the back of news of discovery of a new oil block.

Global markets were also up by about one per cent today. The US markets closed yesterday up by more than one per cent. The S&P 500 gained about 1.5 per cent, while the Dow index was up 1.2 per cent. The European and Asian market indices were up by about 0.5 per cent. The Japanese Nikkei was up by about two per cent.

Headline inflation came in at 4.7 per cent, against 4.89 per cent earlier.