Sensex surges 246 pts on WPI boost; banking stocks end firm on rate cut hopes

Equity markets recouped its lost ground after a sluggish opening while key share benchmark indices advanced sharply thereafter, after the key inflation data showed WPI plunging to a record low in August, encouraging investors to resort to short-covering on expectations the RBI may undertake a rate cut during its month-end policy meet. The benchmark Sensex overcame a lacklustre start which saw the index drop 79 points in early trade amid a weak Asian markets sentiment. Even as the markets were a bit edgy ahead of this week’s US Fed meet on policy decision, the receding WPI inflation number provided a major impetus that resulted in the Sensex surging 282 points to touch the day’s high of 25,891.73. [caption id=“attachment_2433150” align=“alignleft” width=“380”]  Reuters[/caption] Finally, the 30-share BSE S&P Sensex ended the session at 25,856.70, up 246.49 points, or nearly 1 percent over its previous close. The broader 50-stock CNX Nifty also ended firm at 7,872.25, up 82.95 points, or 1.1 percent. Market breadth ended on a strong note, with 1,687 stocks advancing against 951 declines on BSE. Elsewhere in Asia, Japan’s Nikkei dropped 1.6 percent, while Chinese indices ended mixed with Shanghai Composite ending 2.7 percent lower while Hang Seng closed marginally higher with 0.3 percent gains. Even as the market showed signs of optimism, foreign brokerage Deutsche Bank cut the BSE Sensex target to 28,000 from the earlier 31,000 amid a mix of global and domestic concerns ranging from sluggish global growth and falling commodity prices to deep emerging markets currency depreciation. Nitasha Shankar, vice president, research YES Securities, said, “Global markets are cautious ahead of the US Fed meeting. Indian markets too are expected to remain volatile ahead of the Fed meet.” On the upside, immediate resistance is at 7875 and a trade above the level of 7875 may take the index to levels of 7945. On the downside immediate support is placed at 7751 being price cluster. A trade below 7751 could drag it down to levels of 7675," said Shankar. Banking shares clocked impressive gains after the a record fall in WPI inflation to (-)4.95 percent in August raised expectations of a rate cut by the RBI. The CPI or retail inflation data is expected to be announced in a short while from now. CPI in July recorded a low of 3.78 percent. Among the banking shares, Axis Bank rose 3 percent to Rs 496, SBI gained 2.2 percent to Rs 235.15, ICICI Bank added 1.8 percent to Rs 272.05 and HDFC Bank was up 0.9 percent at Rs 1,016.90. Other frontline performers such as NTPC surged 5.1 percent to Rs 125.55, Vedanta advanced 4 percent to Rs 101, Tata Steel rose 3.5 percent to Rs 241.30, Hindalco gained 3.4 percent to Rs 78.70 and Wipro was up 2.4 percent at Rs 570.75. The broader markets, too, were in the thick of action as sharp rally in several mid-cap shares saw the BSE Mid-cap index gain 1.3 percent to close at 10,653.14. Shares of Adani Power, Indiabulls Housing Finance, Bajaj Financial Services, Nalco, Reliance Capital, L&T Finance Holdings, Colgate and JP Associates were up 4-5 percent.