Reform hopes, QE set markets on fire; oil cos, banks rise

The Indian stock market surged on Friday, fuelled by the general sentiment boost after the government signalled the resolve to bite the hard reform bullet and the US central bank announced quantitative easing measures to boost the economy.

The Sensex opened up 2 percent at 18381.94 and the Nifty 1.95 percent at 5541.15.

Companies across the board surged, and seemed to ignore all the underlying bad news about a spiralling inflation and falling exports. Banks and oil gas sector were the show stealers.

Oil companies surged as the diesel price increase will cut their losses, while banks rose on hopes the government move will prompt the RBI to cut rates as early as Monday.

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The Bank Index has also seen a significant upmove with ICICI Bank starting the day 4.41 percent higher and SBI which is 3.63 percent higher.

However, an RBI move is not yet definite, warned experts.

“Stage is set for the RBI to change its policy stance. But whether it will change on Monday is debatable,” Sandeep Bhatia of Kotak Institutional Equities told CNBC TV18.

“…The QE3 decision by the Fed will likely push the inflation pressure further. You are going to see higher oil prices. So the central banks here, their hands are tied,” independent economist Andy Xie was quoted as saying on CNBC TV18.

Rupee opened 1 percent lower at 54.85 against the dollar.

India’s inflation is unlikely to have seen any let-up in August, with economists’ estimates in a Reuters poll ranging between 6.75 percent and 7.30 percent. This could have come as a relief for the central bank, ahead of RBI review on Monday.

ICICI Securities has estimated the core inflation at 5.2 percent for August, slightly lower than the July print of 5.44 percent.

Globally, Asian stocks rose for a seventh day as after the Federal Reserve’s move to buy mortgage securities to boost growth and reduce unemployment in the world’s largest economy.

Aviation stocks extended their rally on FDI hopes with SpiceJet, Jet Airways and Kingfisher Airlines posting significant gains.

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BPCL was up 4 percent higher on fuel hike news.

SpiceJet extended gains of 6 percent after the airline held talks with Qatar Airlines for likely investments.

Yes Bank, Kingfisher Airlines, Essar Oil were also among the top gainers.