Markets close at record high levels

Gains driven by rally in bank stocks and China rate cut

The stock markets on Friday closed at an all-time high. The National Stock Exchange’s benchmark Nifty index nearly touched 8,500, with rally in banking stocks and fresh buys in the oil and gas segment.

The Nifty closed at 8,470 points, up from Thursday by 68 points or 0.9 per cent and the BSE exchange’s S&P Sensex crossed 28,360, up 250 points or nearly one per cent. The markets through the day were trading at high levels, led by the banking space.

The BSE Bankex was lead gainer, a little more than two per cent higher. Followed by the BSE consumer durables, capital goods and oil & gas indices, with a little more than one per cent of gains.

“The market rally was expected. The rate cut in China was a good stimulus and the recession in Japan is indicating that the rates are likely to be benign. With inflation in control, rates are likely to be cut in future. Any correction in the markets is not expected to be very deep. That said, only around the Budget time would, I think, the Nifty be able to cross the 9,000 points level,” said P Phani Sekhar, fund manager, Angel Broking.

Banking shares, both public and private sector, were in demand, leading to gains of up to six per cent after Kotak Mahindra Bank (KMB) having said it was acquiring ING Vysya in an all-stock deal.

 

KMB, South Indian Bank, Karnataka Bank, Dhanlaxmi Bank, Lakshmi Vilas Bank and City Union Bank, YES Bank, Axis Bank, ICICI Bank and ING Vysya were among the private sector banks up by three to six per cent. State Bank of India, Oriental Bank of Commerce, Bank of Baroda, Andhra Bank and Bank of India were up by two to three per cent.

 

During the early hours of Friday’s trading session. KMB surged a little over eight per cent to Rs 1,260 on the BSE. It corrected during the later part of the day and the stock closed at Rs 1,199.95, up by 3.7 per cent from Thursday’s close.

“The market’s rally is not entirely substantiated by fundamentals. Valuations are expensive for many stocks, as the market is discounting a large upside in earnings. As far as the surge in banking stocks is concerned, the easing of inflationary pressures has renewed hope of a rate cut, if not in December policy, then certainly in the next one,” said Aneesh Srivastava, chief information officer , IDBI Fedral.

From oil & gas space, Oil and Natural Gas Corporation and Reliance gained 0.5 per cent and 1.5 per cent each. The foreign investors and domestic institutional investors were both net buyers. FIIs bought shares to the tune of Rs 4,134.87 crore and domestic investors bought shares worth Rs 1,662.12 crore and sold shares worth Rs 1,524.53 crore.