Indian Stocks Rise 2.2%, RBI Cuts Rates

123jump.com Staff
08 Dec, 2008
New York City

Reserve Bank of India cut repo rate by 1% to 6.5% over the weekend and Indian government broadened and enlarged its stimulus package. The government will offer cheaper credit to exporters and home buyers. Small businesses will have access to more credit through a separate program. Stocks Surged.

[R]10:00AM New York, 7:30 PM Mumbai - Reserve Bank of India cuts repo rate to 6.5%. Indian government broadened its stimulus package and offered cheap loans to exporters and to home buyers.[/R]

Market Sentiment

In Mumbai, the BSE 30-share Sensex index rose 2.2% or 195.83 to 9,161.03, and CNX Nifty gained 2.7% or 71.80 to 2,786.20.

Of the stocks traded on BSE, 1379 rose, 1,037 declined, and 89 shares were unchanged.

Trading Statistics

Daily turnover on BSE surged to 3,231 crore rupees from 2,315 crore rupees in afternoon trade.

Reserve Bank of India Cuts Repo Rate to 6.5%

The Reserve Bank of India on Saturday cut its repo rate by 100 basis points to 6.5% from 7.5% and the reverse repo rate by 100 basis points to 5% from 6% effective Monday.

Small and Medium Enterprises will be assisted through refinance of 7,000 crore rupees to the Small Industries Development Bank of India. The incremental loans and advances will be counted as outstanding loans from September 30, 2008.

In addition, the government is likely to provide 4,000 crore rupees loans through National Housing Bank with more details released next week after the meeting held by the RBI.

Reserve Bank of India has also decided to permit banks to extend loans to authorized dealers to fund the purchase of convertible bonds.

Loans below 20 lakhs rupees granted by banks to mortgage lenders or housing finance companies will be classified under priority sector. The central bank has also decided to extend exceptional/ concessional treatment to the commercial real estate exposures and loan maturities will be extended to June of 2009.

Export financing for short term trade notes will be available at a rate below 2.5% for maturities less than 180 days.

Tea Exports Fall 5%

Economic Times of India reported today that tea exports dropped 5% to 16.55 million kilograms in October from 17.45 million kilograms a year ago on weak demand.

Production in the period gained 11% to 125.8 million kilos.

Gainers & Losers

Indian stocks rose less by forecasted as the market was less convinced about the government’s stimulus package that was announced at the weekend.

The latest government plan to spend 30,700-crore rupees include 20,000 crore rupees in additional expenditure, a 4% excise duty cut worth 8,700 crore rupees and benefits valued at 2,000 crore rupees for exporters.

Early market gains were trimmed by news of a small fire at Reliance Petroleum''s new refinery.

Realty stocks gained after a loan refinance facility for the National Housing Bank was offered by RBI. DLF surged 9.8% to 223 rupees, Unitech rose 6.3% to 32.75 rupees, Parsvnath Developers gained 1.3% to 40.20 rupees, and Housing Development Infrastructure soared 1.5% to 89.50 rupees.

House finance companies rose in trading. HDFC edged up 5% to 1,508.10 rupees, LIC Housing Finance edged up 4.6% to 221.20 rupees, and Dewan Housing Finance advanced 10% to 84.50 rupees.

Oil and Natural Gas Corporation rose 0.6% to 659 rupees on news that the global financial turmoil has not affected its 18,000 crore rupee capital expenditure plan.

Steel companies advanced as government scrapped export duty on iron ore. Tata Steel rose 6.3% to 194.25 rupees, Steel Authority of India gained 2.9% and JSW Steel surged 4%.
Reliance Communications surged 4.8% to 206.75 rupees.

Power generation stocks gained after the government eliminated import duty on naphtha used for power generation. Tata Power Company increased 2.7% to 687.10 rupees and NTPC advanced 3.3% to 166.50 rupees.

Maruti Suzuki India rose 1.4% to 497 rupees after the company reduced prices of all its models by 4%.

However, Mahindra & Mahindra dropped 2.9% to 245 rupees after it announced on Saturday that it will shut down five manufacturing plants for cars, utility and commercial vehicles for 3 to 6 days on weakening demand.

Infrastructure shares gained on the stimulus plan. Reliance Infrastructure gained 4.1% to 554.20 rupees, Larsen & Toubro increased 1.6% to 740.05 rupees, Jaiprakash Associates edged up 3.3% to 68.55 rupees and GMR Infrastructure soared 4.4% to 60.70 rupees.

Gains by IT stocks were pared by a firm rupee that traded at 49.37 against the dollar from 49.57 yesterday. Wipro rose 5.1% to 238.80 rupees, Infosys gained 2.2% to 1161 rupees and Satyam Computer Services jumped 0.3% to 225 rupees.