Sensex snaps losing streak as rate cut hopes grow

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex rose 1.1 percent on Thursday, ending a three-day losing streak, as interest rate-sensitive stocks such as ICICI Bank Ltd rose after lower-than-expected core inflation data raised hopes the Reseve Bank of India (RBI) would ease monetary policy next week.

The gains came after core wholesale price inflation was estimated to have risen 3.8 percent in February from a year earlier, according to a Reuters snap survey of three analysts and traders on Thursday, below expectations of a 4.2 percent rise.

The data, combined with the government's pledge to stick to its fiscal deficit target, raises hopes the RBI will cut interest rate by 25 basis points at its policy review on Tuesday.

 

RBI Governor Duvvuri Subbarao called the recently unveiled 2013/14 government budget "responsible" in a speech in London on Wednesday, further raising hopes for a rate cut given the central bank has previously expressed concerns about the fiscal deficits.

"At least 25 basis point cut is getting discounted in the market and RBI policy remains key," said Daljeet Singh Kohli, head of research at IndiaNivesh Securities Private Ltd.

The benchmark BSE Sensex rose 1.07 percent, or 207.89 points, to 19,570.44, marking its biggest single-day percentage gain since March 8.

The broader Nifty rose 0.99 percent, or 57.75 points, to 5,908.95, closing above the psychologically important 5,900 level.

Rate-sensitive stocks such as State Bank of India gained 3.5 percent while ICICI Bank rose 2.3 percent.

Shares of top private sector lenders ICICI Bank, HDFC Bank Ltd and Axis Bank Ltd gained, recovering from morning falls sparked by accusations from an independent investigative journalist that the three banks had engaged in widespread money laundering.

All three banks said they would investigate the allegations, while emphasising they complied with all regulations adhered to high conduct standards.

Among auto stocks, Maruti Suzuki India Ltd rose 3.2 percent, while Mahindra and Mahindra Ltd ended 0.4 percent higher, on hopes RBI rate cuts would lower financing costs, boosting sales.

Infosys Ltd rose 0.4 percent after it said in a statement that the company had been selected by BMW Group as worldwide partner for application basis infrastructure management services for five years.

Reliance Industries Ltd gained 1.8 percent, while Oil and Natural Gas Corp Ltd rose 1 percent on expectations of additional inflows as both stocks could see an increase in their weightage in FTSE indexes after a rebalancing announced last week by the index provider, dealers said.

However, among stocks that fell, Titan Industries Ltd ended 3 percent lower on Thursday on concerns over stress on its working capital cycle and interest costs, dealers said.

Concerns over a proposal by the RBI of linking the gold leasing rate to the base rate could potentially reduce earnings by up to 10 percent, HSBC Securities said in a note.

National Aluminium Co Ltd (NALCO) fell 4.3 percent a day ahead of the government's planned stake sale on Friday.

(Additional reporting by Manoj Dharra; Editing by Subhranshu Sahu)