Market banks on rate cut

Sensex up 329 points; metals, power and banking lead rally.

The markets closed on a strong note despite the Reserve Bank of India’s (RBI) decision to hold on to key rates. But the sliverlining was the central bank’s projection of inflation touching 3 per cent by March, raising hopes that rates may be cut in the next three months.

Another reason for the increase registered by stocks On Tuesday rise was short covering by traders in many stocks that had been beaten down in the last few days. With January’s expiry just two days away on Thursday, traders bought to square off positions.

Both Sterlite Industries and Reliance Infrastructure hit the upper circuit On Tuesday. Others like Reliance Communications, Reliance Industries and Sun Pharma were up over 6 per cent.

The BSE-Sensex opened with a positive gap of 129 points following a surge in the Japanese market where the government allowed public funds to help companies facing financial crunch. The Nikkei ended over 5 per cent higher. Other Asian markets were closed On Tuesday.

The Sensex and touched an intra-day high of 9,021 points and finally closed up 329.73 points to close at 9,004.08 points. The CNX Nifty rose by 92.80 points to 2,771.35 points.

“Worldwide, stock markets are looking for a relief rally. They are looking at factors like slight depreciation of the dollar and oil price rise,” said Amitabh Chakraborty, head (equities) Religare Securities.

Also, the results of ICICI Bank and State Bank of India were quite encouraging. “The third quarter results have been above the market’s subdued expectations. And even in the fourth quarter, things may not be so bad,” added Chakraborty.

All the sectoral indices were up. Metals led the rally with a rise of 5.55 per cent.

Foreign Institutional Investors were net sellers of Rs 228.56 crore and Domestic Institutional Investors were net buyers of Rs 139.64 crore .