The stock markets staged a smart recovery on Tuesday as the Reserve Bank of India hiked the cash reserve ratio (CRR) by 50 basis points and left all key rates unchanged, while maintaining the economic growth forecast for fiscal 2008 at 8.5 per cent.
"The credit policy was in line with market expectation and the raising of CRR was partly anticipated. Markets are more relieved because other global markets have also bounced back," says Deepak Jasani, head of retail research of HDFC Securities.
While the benchmark Sensex of the Bombay Stock Exchange closed the day higher by 290.08 points or 1.90 per cent, the 50-share Nifty of the National Stock Exchange gained 88.80 points or 2 per cent to close at 4528.85 points. The market breadth was strongly positive on the Sensex with 24 of its 30 stocks moving up.
Hiking the CRR by 50 basis points to 7 per cent, RBI has kept the repo, reverse repo and bank rate unchanged. Though banking index of the BSE, the Bankex, slipped during early trade to touch a low of 7925.04 points, it recovered to hit an intra-day high of 8178.70 points, before closing at 8148.68 points.
However, the index formed a mixed bag with 8 stocks out of the total 18 ending in the red. Kotak Bank (up 3.55 per cent at Rs 740.90), Yes Bank (up 3.44 per cent at Rs 189.65) and HDFC Bank (up 3.35 per cent at Rs 1,198.65), gained the most among banking stocks.
Major gainers in the Sensex included SBI (up 8.30 per cent at Rs 1,624.50), L&T (up 7.46 per cent at Rs 2606.50) and ACC (up 6 per cent at Rs 1059.95).