Action is picking up in the equity market. The policy move by the Reserve Bank of India (RBI) on Tuesday saw traders returning to the Street and pushing stock prices a 10-week high. The Bombay Stock Exchange (BSE) benchmark, the Sensex, touched the 17,000-mark, as sentiments got a boost on the announcement of a 50-basis-point cut in the Cash Reserve Ration (CRR) — money banks have to deposit with the RBI.
The Sensex gained 224 points, or 1.46 per cent, to 16,995. The broader S&P CNX Nifty of the National Stock Exchange (NSE) rose 81 points, or 1.61 per cent, to 5,127. Futures and options contracts worth Rs 2.5 lakh crore were traded on the NSE, the highest turnover seen on the bourse since November 25.
Among other emerging markets, Brazil, China and Russia have either cut borrowing costs recently or reduced lenders’ reserve requirements.
However, share prices in the European markets fell on Tuesday. The STOXX 50 index dropped 1.1 per cent, the FTSE 100 fell 0.7 per cent and the DAX declined 1.03 per cent as concerns of debt crises remained. This could put some pressure on domestic markets when they open for trade tomorrow.
Global financial services firms suggest Greece might head towards a disorderly default. The failure to reach a deal by March, when Athens has to pay euro 14.5 billion of maturing debt, will lead to a default. Euro zone finance ministers have already rejected an offer from private bondholders to help restructure Greek debts.
Domestic brokers believe the worst has passed for the banking sector.
“As far as banks are concerned, the worst is over. Things are not as bad as anticipated,” said Raamdeo Agrawal, joint managing director, Motilal Oswal Financial Services.
He said on Tuesday’s positive sentiment would further boost rate-sensitive stocks and banking stocks would benefit the most.
While State Bank of India gained 5.2 per cent, ICICI Bank rose 3.3 per cent. The capital goods sector on the BSE gained 3.3 per cent, the banking index rose 3.2 per cent, metal index was up 1.8 per cent and the auto index gained 1.5 per cent. Larsen & Toubro, the largest engineering firm, rose 5.6 per cent to Rs 1,349 and was the biggest contributor to Sensex gains. The company had posted better-than-expected results yesterday, mainly due to rise in treasury income and larger dividend payouts from its units. Reliance Industries, which contributes almost a tenth to the benchmark index, gained 1.6 per cent to Rs 783. The company has said it would buy back shares from February 1, and close the offer on January 19 next year.
| RIDING HIGH ON SUBBARAO | |||||||
| Jan,24 2012 | %chg* | %chg** | Jan,24 2012 | %chg* | %chg** | ||
| BSE Auto | 8,998.04 | 1.53 | 10.49 | BSE Capital Goods | 10,208.70 | 3.30 | 26.54 |
| M & M | 685.15 | 3.56 | 0.31 | L & T | 1,349.70 | 5.64 | 35.63 |
| Apollo Tyres | 67.00 | 3.55 | 13.75 | ABB | 774.75 | 2.43 | 32.75 |
| Ashok Leyland | 27.50 | 3.19 | 20.88 | Punj Lloyd | 50.90 | 1.90 | 28.73 |
| Bharat Forge | 285.30 | 3.18 | 13.46 | Suzlon Energy | 26.50 | 1.73 | 47.22 |
| BSE Bankex | 11,286.43 | 3.21 | 23.3 | BSE Realty | 1,741.41 | 1.14 | 26.59 |
| Canara Bank | 473.25 | 9.60 | 30.16 | Sobha Developers | 258.80 | 5.91 | 35.00 |
| Bank of India | 340.10 | 6.75 | 27.71 | HDIL | 81.00 | 3.73 | 51.97 |
| SBI | 2041.30 | 5.19 | 26.05 | Unitech | 28.10 | 2.93 | 45.60 |
| IDBI Bank | 101.15 | 4.82 | 30.01 | Oberoi Realty | 248.05 | 2.06 | 18.97 |
| *change over previous day, ** change over December 30, 2011 Data compiled by BS Research Bureau | |||||||
“If the CRR cut is followed by fiscal reforms and ease of doing business, it will have a huge impact on stock markets,” said
S Naren, CIO (equities), ICICI Prudential AMC. According to provisional figures, while foreign institutional investors bought stocks worth Rs 800 crore, domestic institutional investors were sellers to the tune of Rs 262 crore.
