Sensex hits 30,000 on RBI's surprise rate cut

Sensex and Nifty hit their record high levels of 30,025 and 9,119, respectively in the opening trades

Markets have commenced the session on a strong note after the Reserve Bank of India (RBI) surprised the street with a repo rate cut of 25 bps (basis points) to 7.5% from 7.75%. The central bank, however, has kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL).

At 11:05, the S&P BSE Sensex was 223 points higher at 29,815 levels, while the CNX Nifty gained 62 points to 9,058 levels. Sensex and Nifty hit their record high levels of 30,025 and 9,119, respectively.

"The need to act outside the policy review cycle is prompted by two factors: First, while the next bi-monthly policy statement will be issued on April 7, 2015 the still weak state of certain sectors of the economy as well as the global trend towards easing suggests that any policy action should be anticipatory once sufficient data support the policy stance. Second, with the release of the agreement on the monetary policy framework, it is appropriate for the Reserve Bank to offer guidance on how it will implement the mandate," the RBI statement said.

Banking shares are in demand with the Bank Nifty surging by 581 points to 20,542 in early morning deal on NSE after the Reserve Bank of India (RBI) cut the repo rate by 25 bps to 7.5% today. Bank Nifty is up 374 points or 1.87% at 20,335

Punjab National Bank, Bank of Baroda, Kotak Mahindra Bank, Canara Bank, Bank of India, Axis Bank, ICICI Bank, HDFC Bank and State Bank of India are up between 2-3%.

Reacting to the development, Deven Choksey, managing director and chief executive officer, K R Choksey Securitiessaid that post the Budget announcements, he was clearly were of the view that the RBI will cut rates in March instead of waiting till April.

"I am not completely surprised by this move as the data has been quite supportive for the rate cut. If the RBI has to follow certain framework for managing the Monetary Policy, it is this framework of inflation and fiscal deficit. So if the fiscal deficit and inflation are under control, the central bank had to do the rate cut," he said.

Adding: "I think that the public sector (PSU) banks are darlings right now. This 25 bps cut along with the 25 bps cut in January totals up to 50 bps cut in the first quarter of calendar year 2015. Given this, the bottomline performance of PSU banks shall improve. The Nifty should scale up to 9,200 mark and should we cross this level, we can see further upside."

In the auto space, Maruti Suzuki, M&M, Tata Motors, Bajaj Auto and Hero Motocorp are up between 0.5-1.5%.

Also, in the realty segment, Unitech, DLF, HDIL, Oberoi Realty and India Bulls Realty have gained between 2-5%.

Other notable gainers are L&T, Bharti Airtel, BHEL, ITC and TCS, all rising between 0.7-1.3%.

Bharti Realty, the real estate arm of Sunil Bharti Mittal-led Bharti Enterprises, is gearing up to enter the premium residential market in FY16. While the overall real estate sector in India has seen muted growth in recent years, high-end residential projects have been high in demand. Bharti Airtel has gained over 1%.

Larsen & Toubro (L&T) has risen nearly 1% after bagging orders worth Rs 2,215 crore across various business segments in the last two months.

However, the broader markets are underperforming the benchmark indices- BSE Midcap and Smallcap indices are up 0.3-0.4%. Markets breadth is positive with 1,062 advances and 594 declines.