In its biggest single-day rally in over 5 years, benchmark Sensex on Thursday zoomed by 728.73 points to reclaim the 28,000-mark on massive buying across sectors after RBI Governor Raghuram Rajan sprang a surprise by cutting interest rates to boost growth.
Markets opened with a gap-up of nearly 500 points. Before trading began Rajan, who had focused on quelling inflation since taking office in September 2013, lowered the benchmark repurchase rate to 7.75% from 8%, the first reduction since May 2013.
As the day progressed, participants, both domestic and foreign, stepped up purchases. Investor wealth reclaimed the Rs 100-lakh crore mark.
Buying was seen across-the-board as all 12 BSE sectoral indices ended with gains of between 0.44-7.99%. The BSE Sensex resumed at 27,831.16 and then touched over one-month intra day high of 28,194.61 before closing at 28,075.55, a jump of 728.73 points or 2.66%.
Previously, it had soared by 2,110.79 points on May 18, 2009. HDFC, ICICI Bank, ITC, RIL, SBI, HDFC Bank and L&T led the 28 gainers in the 30-share BSE Sensex.
The NSE Nifty opened at 8,424.50 and surged to 8,527.10 before closing at 8,494.15, up 216.60 points or 2.62%. As many as 46 constituents surged in the 50-share Nifty index.
"We believe that this is a beginning of a big rate cut cycle. We expect a further 125 bps over the next 12 months," said Morgan Stanley analyst Chetan Ahya in a report.
The rate cut ahead of a scheduled RBI policy meeting on February 3 will result in "more money in the hand of the consumers," finance minister Arun Jaitley said, while bankers started cutting rates within hours of the announcement.