Sensex up 257 pts as inflation dips

Rally led by shares of companies in realty and financials which are considered more sensitive to interest rate moves

Shares firmed up on Wednesday after headline inflation data touched a five-month low, rekindling hopes among market participants the Reserve Bank of India (RBI) would leave policy rates unchanged in its review meet later this month. The rally was led by shares of companies in realty and financials, considered more sensitive to interest rate moves.

Markets, which had already opened firm, received further impetus after the wholesale inflation (WPI) data for December came in at 6.16 per cent, against the expectations of seven per cent.

“There is now hope on the interest-rate front for the markets. The outside chance of a rate hike looks unlikely now with the WPI numbers improving,” said U R Bhat, managing director, Dalton Capital. The consumer inflation data, announced on Monday, also came in below expectations at 9.87 per cent. RBI will meet on January 28 to decide on direct of interest rates.

The BSE Sensex on Wednesday closed at 21,289, up 257 points or 1.2 per cent, its highest close since December 9, 2013. The NSE Nifty ended the day at 6,320, up 79 points or 1.3 per cent, closing above the 6,300-mark for the second-time this year.

Among the rate-sensitive stocks in the index, L&T, HDFC, ICICI Bank and Hero MotoCorp gained more than 1.5 per cent through the day. On the BSE, the banking, realty and capital goods sector indices gained the most, beating the benchmark Sensex.

Market also tracked gains in the global markets. Most of the Asian markets ended the day, up about one per cent, as did stocks in the US and European markets.

The rally in the market was also due to buying seen ahead of the third-quarter results announcements on Thursday and Friday, analysts said. Technology majors such as TCS, Wipro and HCL Technologies, are scheduled to declare their results in the next two days. After the better-than-expected Infosys results last week, stocks of the technology sector had run-up in anticipation of good December-quarter earnings numbers.

“These stocks have risen quite a bit since the Infosys results. So a large part of the good news has already been accounted for in the stock prices. Any further rise in prices would depend on individual company results,” said Sonam H Udasi, head of research, IDBI Capital. Infosys declared its results last Friday and since then, TCS has risen by 3.2 per cent, HCL Technologies has gained 2.8 per cent while Wipro has gained about 1 per cent. Other companies expected to come out with their results this week are Reliance Industries, ITC, HDFC Bank, Axis Bank and Bajaj Auto.

According to provisional data from the exchanges, foreign institutional investors were net buyers of equity at Rs 713 crore, while domestic institutions continued to be net sellers of equity at Rs 690 crore.

Other companies expected to come out with their results this week are Reliance Industries, ITC, HDFC Bank, Axis Bank and Bajaj Auto.