The Indian equity markets rose today with state run-oil marketing companies leading the gains after the government allowed them to make small corrections in diesel prices.
Investors cheered as they saw the moveas an indication of the government's resolve to push forward with reforms measures.
The Sensex closed at 19964.03, up 0.74 percent and the Nifty closed at 6039.20, up 0.62 percent.
State-run oil marketing companies have been allowed to raise diesel prices in line with increases in global crude oil prices, Oil Minister Veerappa Moily said today, a move that could help the government reduce its vast subsidy bill.
The markets were waiting for some action on the fuel front as rating agencies have warned about the higher fuel subsidy that is burdening the government's finances. However, experts were sceptical and have said implementation is the key.
The move, however, is likely to put pressure on the RBI to cut rates in its policy review on 29 January. The central bank had set fiscal corrective steps from the government as a precondition for any easing move.
The RBI had in its last policy review indicated that it will cut rates in January-March. Already there is wide expectation that it will cut rates on 29 Jan.
"I think the monetary authorities have very limited room for easing. But, nevertheless over the next 12 to 15 months we believe that there is likely to be about 75-100 bps of interest rate cuts and we are positioned for that kind of interest rate cuts in our portfolios," Harsha Upadhyaya, Head-Equities at Kotak MF toldCNBC TV18in aninterview.
Indian economy is projected to grow at a slower pace of 6.1 percent this year even as exports and capital investments are likely to be much better than in 2012, according to the United Nations.
The UN has trimmed its growth forecast from 7.2 percent estimated in June 2012.
However, the forecast of 6.1 percent growth for this year is much better than 5.5 percent expansion seen in 2012, as per the UN 'World Economic Situation and Prospects 2013? report.
Reacting to the fuel price news,shares of ONGC rose 4 percent , Indian Oil Corporation6 percent , HPCL6 percent , BPCL4 percent adn EssarOil (5 percent).
Stocks in news
HCL Tech closed up 4 percent after the company's consolidated net profit grew 9 percent quarter-on-quarter to Rs 965 crore, as against an estimate of 5 percent decline to Rs 840 crore.
Bajaj Auto closed down 1.14 percent after the research firm Deutsche Bank downgraded the stock to hold rating with a target price of Rs 2,150.
RIL closed up 3 percent ahead of its results tomorrow.
Bank stocks including Karnataka Bank (3 percent) , HDFC Bank (1 percent) and SBI (1.46 percent) closed up on hopes of a rate cut.
With inputs from Agencies