Weak IIP data adds fuel to rate cut hopes Sensex at 1-mth high
Interest rate sensitive banks and realty stocks surged on Tuesday, pushing up benchmark Sensex by 195 points to a fresh one-month high after weak IIP April data boosted hopes that RBI will cut lending rates soon.Updated: Jun 12, 2012 20:19 IST
Interest rate sensitive banks and realty stocks surged on Tuesday, pushing up benchmark Sensex by 195 points to a fresh one-month high after weak IIP April data boosted hopes that RBI will cut lending rates soon.
After S&P's threat to downgrade India's sovereign rating to junk status shaved off 51 points Monday, Sensex opened nearly 100 points down and touched the day's low of 16,553.47.
However, investors bought banks, realty and capital goods scrips as the 0.1% growth in IIP for April reinforced rate cut expectations that RBI will shift gears to support growth in its June 18 mid-quarter monetary policy review.
"Today's weak industrial production reading increases the likelihood of a 50 bps rate cut" said Sonal Varma of Nomura.
SBI, HDFC Bank and ICICI Bank gained in the 1.5-2% range and lifted the key index by 194.79 points or 1.17% to 16,862.80 at close, the highest level since May 7.
In the 30-share index, 25 closed higher while five ended lower. Gainers were led by Maruti Suzuki which jumped 3.48% as investors cheered auto major's decision to merge engine and transmission maker Suzuki Powertrain with itself.
Tata Motors (3.14 pc), L&T (2.53 pc) and Sterlite (2.51 pc) were other notable gainers.
Brokers also said the rally today was supported by Finance Minister Pranab Mukherjee's statement that government would take steps to give positive signals to the industry.
The market also ignored weakness in rupee as the currency breached the 56-level a dollar today and was trading at 55.8.
Among indices, BSE-Realty was the best gainer (2.01 pc), followed by BSE-Bankex (1.90 pc), BSE-Capital Goods (1.84 pc), BSE-Auto (1.76 pc) and BSE-Consumer Durables (1.52 pc).
All eyes are on the May inflation data to be released on June 14 and market is expecting 7.5% acceleration in Wholesale Price Index (WPI) from a year ago, traders said.
"Thursday's May inflation print and core inflation reading will be important for the RBI policy decision," said Siddhartha Sanyal, Chief India Economist, Barclays Capital.
The 50-share NSE Nifty rose by 61.80 points, or 1.22% to 5,115.90.
Asian stocks ended lower, surrendering much of the steep gains made in the previous session, as initial euphoria over Spain's bank bailout gave way to uncertainty over the details.
"... while the debt crisis continues, at least the likelihood of it all unraveling in the week diminished. However, despite the better tone in equities, and the modest reacquisition of risk within bonds, other assets continued to exhibit concerns over the pace of global activity," said David Joy, Chief Market Strategist, Ameriprise Financial.
Key benchmark indices in China, Hong Kong, Japan, South Korea and Taiwan fell by between 0.43% to 1.02% while Singapore's Straits Times rose by 0.33%.
European stocks firmed up in their opening trade as key benchmark indices in UK, France and Germany moved up by 0.32% to 0.48%.
The NSE 50-share Nifty also rose by 61.80 points or 1.22% to finish at 5,115.90.
Major gainers in Sensex were Maruti Suzuki (3.48 pc), Tata Motors (3.14 pc), L&T (2.53 pc), Sterlite (2.51 pc), Hindalco (2.16 pc), ONGC (1.99 pc), SBI (1.96 pc), M&M (1.87 pc), HDFC Bank (1.85 pc), ICICI Bank (1.61 pc), ITC (1.48 pc), NTPC (1.48 pc), BHEL (1.39 pc), Bharti Airtel (1.36 pc), Coal India (1.34 pc) and Infosys (1.24 pc).
However, Dr Reddy's Lab fell by 1.81% while Wipro shed 1.71%.
"Reform, not stimulus, is required to reboot India?s macro-economic performance," said Richard Iley, Chief Asia Economist, BNP Paribas.
The market breadth continued to show positive trend as 1,361 shares finished in green while 1,312 ended in red. The total turnover moved up to Rs 1,963.27 crore from Rs 1,947.16 crore Monday.
Foreign institutional investors (FIIs) bought shares worth a net Rs 130.39 crore Monday as per provisional figures from the stock exchanges.
First Published: Jun 12, 2012 10:14 IST