India Cuts Rates to 8-Year Low

123jump.com Staff
05 Jan, 2009
New York City

Stocks in Mumbai surged after the Reserve Bank of India cut interest rate to eight-year low. In volatile trading stocks edged above 10,000. The government lifted restrictions for foreign investors and promised more capital for state controlled banks.

[R]10:00AM New York, 7:30 PM Mumbai - Reserve Bank of India cuts repo rate 100 basis points to 5.5%.[/R]

Indian stocks rose above 10,000 as fiscal and monetary authorities unveiled additional measures to spur economic growth. Trading was volatile.

Market sentiment was boosted on the news that the U.S. President-elect Barack Obama will cut taxes.

Financial, mining and metals companies and auto makers stocks increased.

In Mumbai, the BSE 30-share Sensex index increased 3.2% or 317.38 to 10,275.60, and the CNX Nifty rose 2.5% or 74.70 to 3,121.45.

Of the stocks traded on BSE, 1,680 advanced, 859 declined, and 74 were unchanged.

Trading Statistics

Daily turnover on the BSE declined to 4,171 crore rupees from 4,279.80 rupees on Friday last week.

Reserve Bank of India Cuts Repo Rate to 5.5%

The Reserve Bank of India on Friday slashed the repo rate and reverse repo rate by 100 basis points to 5.5% and 4% correspondingly.

RBI also lowered the cash reserve ratio by 50 basis points to 5% effective January 17, 2009.

Separately, the Economic Times of India reported that government today hiked the refund of taxes for exporters and pegged them to the level before November 5, 2008.

However the Federation of Indian Export Organizations urged the government to introduce more concessions.

India is targeting to exports goods worth $200 billion this year compared with $160 billion last year.

Gujarat Government Announces Industrial Policy

India''s minister of state for industry Saurabh Patel said today Gujarat government has announced its new industrial policy to increase investment in Dahej and Dholera. The two towns will have investment incentives to set up large manufacturing projects. Dahej will have 45,000 hectares and Dholera will have 54,000 hectares of land for these projects.

The proposed investment will be done with the government of Japan to develop special corridor for freight and auto manufacturing linking Mumbai and Delhi.

Gainers & Losers

Reliance Industries jumped 6.4% to 1,365.75 rupees after crude oil prices soared to $47 per barrel on rising tensions in the Middle East after a ground operation by Israel in Gaza.
ONGC gained 6.4%.

Ranbaxy Laboratories fell 0.2% after Japan''s Daiichi Sankyo Co, which has a 63.9% stake in the company, announced today it will book an appraisal loss of 359.5 billion yen on its stake in Ranbaxy Laboratories.

Reliance Communication soared 5.4%. Bharti Airtel dropped 2.8% on the worries that it may have to cut tariffs to retain customers after the launch of nationwide GSM-based cellular services by Reliance Communication.

Hindustan Zinc rose 8.2% after the government withdrew exemption from basic customs duty on zinc.

Financial stocks increased on speculation bond yields and reduced rates will increase profitability. ICICI Bank rose 6%, HDFC Bank gained 2.7%, State Bank of India increased 2.4%, Allahabad Bank advanced 2.5%, Union Bank of India rose 2.7% and Bank of Baroda gained 2.3%.

Infosys gained 3.9%, Wipro rose 1.1% and Tata Consultancy Services increased 3.6%.

Satyam Computer Services declined 6% on reports the company''s management and some of its institutional investors are exploring a merger with another software firm.

Future Capital Holdings rose 10.7% after the company acquired non-banking financial firm Black Diamond Finance. HDFC gained 5.4%.

Automakers increased after the government unveiled plans to help boost truck and bus sales. Tata Motors gained 2.1% and Ashok Leyland advanced 0.9%.

Ahluwalia Contracts rose 5% after it received orders worth 394 crore rupees that includes construction of depots at Delhi and Mumbai and the building work for Tata Medical Centre in Kolkata.

Grasim Industries rose 1.7%, while UltraTech Cement fell 1.5% after Aditya Birla Group said on Friday last week cement dispatches rose 13.4% to 2.98 million tons in December from a year ago period.