Sensex up 122 points; bank stocks rise

Expectations of a rate cut by the apex bank coupled-with capital infusion into the public sector banks cheered investor sentiments and led a barometer index of the Indian equity markets to trade up 122 points during the mid-afternoon session on Monday.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) also made gains during the session. It was up 27.15 points or 0.32 percent at 8,560 points.

The S&P BSE Sensex, which opened at 28,089.09 points, was trading at 28,236.67 points, up 122.11 points or 0.43 percent from the previous day's close at 28,114.56 points.

The Sensex so far touched a high of 28,237.09 points and a low of 28,071.37 points in the intra-day trade.

According to analysts, investors are hopeful of a cut in the interest rates during Tuesday's Reserve Bank of India's (RBI) monetary policy review.

"The most important upcoming trigger for the markets is the monetary policy review. A cut in interest rates will restore investors' confidence," Devendra Nevgi, chief executive of ZyFin Advisors, told IANS.

"Even if there is no rate cut, the knee-jerk reaction will neither be that disappointing nor long-lasting. The fact that RBI may maintain a status-quo in the interest rates has also been factored-in."

According to Nevgi, markets will closely go through the language used by the RBI Governor in his assessment of the economy to give further cues on the future of rate cuts.

"The language on the Indian economy, oil prices, monsoon, inflation and the US rate hike will be closely monitored as it will give the guidance to future RBI moves," Nevgi predicted.

India Inc. expects a rate cut by the RBI during this review. Indian industry feels that the upcoming review might be the last chance to cut rates in this calendar year before inflation spirals up and the US Fed decides on its own rates in September.

Anand James, co-head, technical research desk, Geojit BNP Paribas, told IANS that the markets were also hopeful that the government will find a way to end the parliament logjam.

"The all party meet which has been called today will be closely monitored. It is expected that the government may find a way out of the political logjam," James told IANS.

"Parliament's logjam has cast a shadow over the government's ability to pass economic reforms. It has also put a question mark over the fate of key legislation like the GST (goods and services tax) and the land bill."

James pointed out that last week's healthy roll-over figures from expiry of July derivative contracts and announcement of Rs.70,000 crore in PSBs (public sector banks) in the next four years continues to boost the markets.

Sector-wise, healthy buying was observed in banking, automobile and consumer durables stocks. However, oil and gas, metal and capital goods scrip came under selling pressure.

The S&P BSE banking index zoomed by 313.53 points, the automobile index rocketed by 198.18 points and consumer durables index augmented by 176.13 points.

The S&P BSE oil and gas index was receded by 66.57 points, metal index declined by 46.51 points and capital goods index fell by 31.71 points.