RBI rate cut booster helps Sensex shrug off weak global cues, ends up 162 pts

A massive rally in the second-half powered by an RBI-induced rate cut panacea propelled Sensex past the 26,000-mark but the emergence of profit-taking towards the fag-end put the brakes on the rapid advancement, as investors turned risk-averse in the wake of global markets sell-off. While lingering global economic woes and China’s receding growth prospects put investors on the back foot across the US, Europe and other Asian gauges, Indian shares, however, overcame the early resentment, thanks to the higher-than-expected repo rate cut by the RBI. [caption id=“attachment_2449386” align=“alignleft” width=“380”] Reuters[/caption] As investors resorted to short-covering mainly in rate sensitive and the other recently beaten-down sectors, the Sensex edged past the 26,000-mark to touch the day’s high of 26,054.37, up 437 points. The revival, however, came not before the index had come under severe hammering in the first half amid weak overseas cues that pulled it down to the day’s low of 25,287.33, down 330 points. Effectively, the Sensex gyrated 767 points amid heightened volatility. Finally, the 30-share BSE S&P Sensex ended the session at 25,778.66, up 161.82 points, or 0.6 percent from previous close. The broader 50-stock CNX Nifty closed at 7,843.30, up 47.60 points, or 0.6 percent. However, market breadth ended weak indicating the global sentiment would continue to dictate the trend. Of the 2,715 stocks traded, 1,356 scrips declined and 1,250 advanced while 109 stocks remained unchanged on BSE. Other Asian indices such as Japan’s Nikkei ended 2.8 percent lower, while key Chinese gauges such as Hang Seng shed 3 percent and Shanghai Composite fell 2 percent respectively. After a bearish start, major European gauges reversed the trend in mid-day trade by clocking modest gains. Back home, investors lapped up banking, auto and realty shares enthused by the RBI’s 50 basis points cut in repo rate to 6.75 percent giving a much-needed push for the faltering growth as inflation is following its projected trajectory. “Despite the monsoon deficiency and its uneven spatial and temporal distribution, food inflation pressures have been contained by resolute actions by the government to manage supply,” the RBI said in its policy statement. Shares of HDFC rose 3.5 percent to Rs 1,213.55, Maruti jumped 3.1 percent to Rs 4,674, M&M added 2.5 percent to Rs 1,251.75, HDFC Bank gained 1.2 percent to Rs 1,059 and SBI was up a percent at Rs 242. “The more-than-expected rate cut by the RBI was extremely positive for the markets and should provide a major boost to the sluggish growth. We will see more banks announcing cut in base rates in the coming days, which is good for banking stocks as well in the near to medium term,” said Kapil Bali, executive director & CEO, YES Securities. Responding to the RBI’s rate cut decision, State Bank of India, the country’s biggest lender, announced a 40-basis-point cut in its base rate to 9.3 percent with effect from October 5, while Andhra Bank resorted to a 25 bps cut in rate to 9.75 percent. In the realty space, shares of HDIL flared up 10 percent to Rs 72.60, Indiabulls Real Estate rose 4.3 percent to Rs 64.25, DLF gained 4.2 percent to Rs 134.65, Sobha Developers added nearly 4 percent to Rs 273.25 and DB Realty was up 3.4 percent at Rs 58.55.