Super Mario powers Street rally

Sensex jumps nearly 2% on ECB's unlimited bond-buying plan commodities, rupee gain

Indian shares surged on Friday, tracking a strong rally in global markets, as investors cheered European Central Bank (ECB) President Mario Draghi’s unlimited bond-buying plan to tackle the Euro zone’s debt crisis.

The BSE benchmark, the Sensex, gained 1.95 per cent, or 337.46 points, to close at 17,683.73, registering its biggest gain since June 29. At the National Stock Exchange (NSE), the 50-stock Nifty jumped 1.98 per cent, or 103.70 points, to 5,342.10.

Stock markets rose globally on Friday as investors hoped ECB’s new plan would help bring back bond yields in troubled countries like Spain and Italy to sustainable levels.

Industrial metals hit three-and-a-half month highs. Copper jumped around three per cent to close at $7,844 a tonne, while aluminium and zinc closed the week at $1,988 a tonne and $1,915 a tonne, up 1.27 per cent and 2.24 per cent, respectively.

“The bottom line is, ECB is delivering on its commitment to defend the euro. The tail risk of a euro break-up triggering a rerun of a deep global-financial-crisis-style recession in Europe and potentially a global recession is receding,” said Shane Oliver, the Sydney-based head of investment strategy at AMP Capital. (Click for tables & graph)

Among the major gainers on BSE, Tata Steel jumped 5.72 per cent to Rs 370.70 and ICICI Bank advanced 4.68 per cent to Rs 937.85.

“The India market will continue to perform well if we remain in a period where markets are bouncing, but India could be equally vulnerable if markets sell off,” said Philip Poole, global head of macro and investment strategy, HSBC Global Asset Management.

The rupee appreciated in line with other Asian currencies in reaction to the ECB move. It on Friday closed at 55.40 per dollar, up 25 paise, or 0.5 per cent, over previous close. It traded between 55.36 and 55.63 against the dollar on Friday. The currency tracked the global weakness in the dollar index, which fell from 81.04 to 80.56 in a day. The euro strengthened against the dollar, from 1.26 to 1.28, on Friday. According to BSE data, the foreign fund inflows, worth Rs 502 crore, also helped the rupee gain against the greenback.

“All that he (Draghi) is saying is that there is a plan, and if any country asks for funds, he will buy bonds. And, it will be a sterilised intervention, which means the bond buy will be balancesheet neutral. So, besides sentiment, the Indian currency market will be largely unaffected,” said a senior foreign bank executive.

Benchmark stock indices in major Asian markets like Japan, Hong Kong, South Korea and China jumped over two per cent each on Friday.

Major European stock markets added to their yesterday’s gains. Spanish 10-year government bond yields fell 27 basis points to 5.8 per cent — for the first time below six per cent since May, according to Reuters. Equivalent Italian bonds fell 19 basis points at 5.13 per cent.