Surprise Rate Cut Lifts Sensex

123jump.com Staff
03 Nov, 2008
New York City

The surprise rate cut by the Reserve Bank of India this weekend lifted stocks in Mumbai trading. Autos, financials and realty stocks rallied. Rupee rose to 49 from 49.44 against a dollar. International mutual funds linked to invest in India faced withdrawals of $120 million in the last week in Oct.

[R]10:00AM New York, 7:30 PM Mumbai – Stocks in Mumbai surged after the Reserve Bank of India cuts interest rates to 7.5%.[/R]

Market Sentiment

Stocks in India rose led by automakers, financial and realty stocks after the central bank in a surprise move lowered the key lending rate, reduce bank cash reserve requirements and decreased the required purchase of government bonds by 1%. The RBI lowered the rates for the second time last week to prevent the economic growth from falling further.

In Mumbai, the BSE 30-share Sensex rose 5.6% or 549.62 to 10,337.68, and the CNX Nifty advanced 5.5% or 158.25 to 3,043.85.

Of the stocks traded on the BSE, 1,970 increased, 633 declined, and 49 were unchanged.

Trading Statistics

Daily turnover on BSE stood at 3,668 crore rupees from 3,717.17 crore rupees on Friday last week.

Financial stocks, realty, capital goods and automakers gained.

India to Ask State-Run Bank to Lower Rates

Finance Minister Palaniappan Chidambaram said today the government will ask state run banks to cut their borrowing costs and provide liquidity to consumers and businesses.

The Reserve Bank of India cut repo rate by 50 basis point to 7.5% and the reduced the cash reserve requirements by 100 basis points to 5.5% on Saturday. The surprise second cut in interest in less than a week lifted market sentiment raised hopes that the economy will avoid slowdown.

In addition, the purchase of government bonds reserve requirements were lowered by 1 percentage point to 24% of deposits.

The apex bank today conducted a special 14-day money market operation for mutual funds and non-banking finance companies for 60,000 crore rupees to provide liquidity in in the money markets.

Separately, Prime Minister Manmohan Singh told top business leaders today that the government will take all the necessary monetary and fiscal policy measures to protect economic growth.

Investors Withdraw $480 million From India Funds

The Economic Times reported today that global fund-tracking firm EPFR said global investors have withdrawn $480 million from India-focused funds, with $120 million withdrawn last week.

Total redemptions from India-dedicated funds have reached $2 billion so far this year.

Gainers & Losers

Reliance Industries increased 4.8% to 1,437.05 rupees after retail unit Reliance Retail and UK based Wincanton shelved their proposed joint venture.

Ranbaxy Laboratories increased 12.3% to 190.35 rupees, Jaiprakash Associates soared 13.4% to 81.45 rupees.

Reliance Infrastructure advanced 17.4% on news that the promoter may shore up its equity to 50% to forestall a hostile takeover bid.

Reliance Communications increased 5.4% to 232.65 rupees.

Capital goods stocks gained. Larsen & Toubro and Suzlon Energy rose 3.4% and 10.8% respectively.

Bharat Heavy Electricals gained 4.7% to 1,341.15 rupees on news that the company is likely to bid for turbines and generators of 700 megawatt or more for nuclear power plants.

Financial stocks rose after the Reserve Bank of India cut its key rate. ICICI Bank gained 7.9%, State Bank of India rose 11.8%, and HDFC Bank edged up 4.6%.

Punjab National Bank, Bank of India, Bank of Baroda, Union Bank of India, Federal Bank, IDBI Bank, Canara Bank, Indian Overseas Bank, Allahabad Bank, IndusInd Bank advanced between 1.4% and 8.9%.

HDFC increased 7.2%. Indiabulls Real Estate, DLF and Unitech rose between 2% and 14.9%.

Automakers increased on the hopes that rate cut will spur auto sales. Tata Motors gained 11.1%, Maruti Suzuki India rose 6.6%, Mahindra & Mahindra edged up 3.1% and Hero Honda Motors fell 3.1%. However, Bajaj Auto declined 8.6%.

IT stocks were mixed after the rupee rose to 49 from 49.44 against a dollar from Friday last week. Satyam Computer Services fell 1.5% to 300.10 rupees after winning a SAP implementation contract in Kuwait from First Holding.

Wipro rose 1.51% and Infosys dropped 0.2% to 1,378.10 rupees and Tata Consultancy Services rose 2.1% to 548.70 rupees.

Housing Development & Infrastructure fell 4.1% despite profit increased 15.8% to 265.68 crore rupees in the second quarter to September.

Nagarjuna Construction Company rose 4.6% after securing two orders worth 527 crore rupees.

IVRCL Infrastructure & projects surged 22.9%.

Steel companies increased as the government scrapped a 15% export duty on pig iron, iron and steel ingots, bars and rods. Tata Steel, Steel Authority of India, Jindal Steel, JSW Steel, Welspun Gujarat Stahl Rohren rose between 1.7% and 7.2%.

Airline stocks soared as government scrapped the basic customs duty of 5% on jet fuel and as oil companies cut jet fuel prices. SpiceJet, Kingfisher Airlines and Jet Airways climbed between 5% and 22.6%.