The Indian stock market rallied, ignoring a spiralling inflation, on hopes the government is resolved to bring in the much-awaited economic reforms and the quantitative easing measures announced by the US Fed.
The Sensex ended 18,464.27, 443.11 points higher ( 2.46 percent) and the Nifty 5577.65, 142.30 points up (2.62 percent).
“The mood in the market is very strong. The diesel price increase has given rise to expectation that the government is moving ahead with reforms," said Alex Mathews, Head of Research, Geojit BNP Paribas Financial Services.
India’s WPI inflation in August was a higher-than-expected at 7.55 percent, which had the markets guessing on the likely RBI move on Monday when it meets for the review of its policy.
The government could announce spending cuts for the 2013 fiscal year on Saturday, although the size of the cuts was not immediately clear, two government sources told Reuters.
"There are expectations that the government may allow FDI in various sectors like aviation, retail etc. Globally, the stimulus announced by the US Fed and the ECB is also positive for the Indian market. Also there has been sustained FII inflows. The only concern now is that the market seems to be a little overbought and there can be some corrections,” says Mathews.
The rupee extended gains to hit a new two-and-a-half month high on Friday afternoon on hopes the government would continue to announce more policy reforms that would attract more foreign fund inflows into the country.
Gold prices touched a new all-time high of Rs 32,900 per 10 grams here today, tracking the metal's rally overseas after the US Federal Reserve decided to add further stimulus to boost the world's biggest economy.
Shares in Indian oil marketing companies and refiners erased earlier sharp gains and turned negative as the spike in crude prices post-QE3 is offsetting the positive impact of the government’s diesel price hike. Indian Oil Company fell 2.24 percent, Bharat Petroleum fell 1.27 percent and HPCL also fell 2.61 percent.
The Bank stocks also showed some upmove ahead of the RBI Policy Review on Monday. Even if the RBI does not cut rate, there could be a change in its policy stance. ICICI Bank was 4.97 percent up , SBI was 5.52 percent up.
Stocks in News
Bharti Airtel was up 0.57 percent on reports that the company has filed draft prospectus with Sebi for its telecom tower business.
Gail was up 1.38 percent as the company was seen as the main beneficiary of government's move to cap subsidised sale of LPG cylinders. Citi has seen an upside of 7-8 percent to Gail's earnings if the subsidy formula is maintained.