Sensex up 248 points as RBI surprises with status quo on rates

Mumbai: The benchmark Sensex gained for the first time in seven days, rising 248 points on Wednesday after the RBI unexpectedly decided to keep key policy rates unchanged.

Read more: Rajan surprises everyone yet again; leaves rates unchanged

Realty, capital goods, oil & gas and power shares led all 12 BSE sectoral indices higher. Heavyweight Reliance Industries, along with HDFC Bank and State Bank of India, helped to lift the Sensex as all but three of the 30 index stocks advanced.

BHEL and Tata Power topped the gainers on the index. Auto stocks Bajaj Auto and Hero Motocorp also moved up. The S&P BSE Sensex opened lower and surged to the day's high of 20,917.57 after the RBI's Mid-Quarter Monetary Policy Review. It ended at 20,859.86, a rise of 247.72 points or 1.2 per cent.

The Reserve Bank of India kept the short-term lending rate unchanged 7.75 per cent, against expectations of a 25 bps increase. The cash reserve ratio was maintained at 4 per cent.

"The RBI unexpectedly kept the policy rate on hold in light of the weak growth backdrop and as it expects inflation to ease, partly as a result of food supplies normalising," Leif Lybecker Eskesen, Chief Economist for India & ASEAN at HSBC, said in a note.

"However, it also signalled that if that was not to materialise, it stands ready to tighten further to stabilise inflation expectations. It may well come to that."

In the previous six sessions, the Sensex had plunged by over 714 points, or 3.35 per cent, from its peak close of 21,326.42 on December 9. The CNX Nifty on the National Stock Exchange flared up by 78.10 points, or 1.27 per cent, to end at 6,217.15. The SX40 on the MCX Stock Exchange closed up 135 points at 12,399.59.

Trent gained 10.74 per cent after UK retailer Tesco said it had applied to buy a 50 per cent stake in Trent Hypermarket Ltd and open supermarkets in India. Biotechnology major Biocon, which signed a pact with Quark Pharmaceuticals to develop an ophthalmic drug, advanced 11.38 per cent.

India Inc welcomed the central bank's decision, saying an interest rate hike is not the solution to tackle inflation. RBI Governor Raghuram Rajan said continuing weakness in growth was the main driver of his policy action.

"RBI's move deviated from its conventional practice to support growth," said Jignesh Chaudhary, Head of Research at Veracity Broking Services. "Markets are now keenly watching Fed monetary statement due later tonight."

Key indices in Japan moved up on higher exports and a fall in the yen against the dollar. Other Asian stock indices were mixed ahead of the Federal Reserve's decision on its stimulus programme. European stock markets traded higher.

In the domestic market, the Sensex gainers were led by BHEL (5.7 pc), Tata Power (4.04 pc), Bajaj Auto (3.87 pc), Hero MotoCorp (3.14 pc) and Larsen & Toubro (2.83 pc). Other shares moving up included State Bank of India (2.67 pc), HDFC (2.59 pc), Reliance Industries (2.35 pc), ONGC (2.29 pc) and Gail India (2.29 pc).

Foreign institutional investors bought shares worth a net Rs 249.93 crore yesterday, according to provisional data from the stock exchanges. Among the S&P BSE sectoral indices, Realty rose 3.51 pc followed by Capital Goods 2.61 pc, Oil & Gas 2.15 pc, Power 2.09 pc, Auto 1.73 pc, Bankex 1.4 pc, Consumer Durables 1.35 pc and Healthcare 1.16 pc.

The total market breadth was positive as 1,497 stocks finished higher while 951 closed lower. 

Next: Rupee loses another 8 paise to 62.09 against dollar

Rupee loses another 8 paise to 62.09 against dollar 

Mumbai: The rupee surrendered initial gains and fell for the second day, losing eight paise to 62.09 against the dollar on Wednesday as concerns about the US Federal Reserve tapering its stimulus programme outweighed the RBI's surprise status quo decision on interest rates.

Demand from importers for the dollar, which strengthened overseas, also put pressure on the rupee, while sustained capital inflows restricted the fall. The rupee opened strong at 61.90 a dollar from the previous close of 62.01 at the interbank foreign exchange market.

It climbed to 61.77 on a smart rebound in domestic stocks after the central bank unexpectedly kept all key policy rates unchanged in its Mid-Quarter Monetary Policy Review. The RBI left the key repo rate at 7.75 per cent and the cash reserve ratio at 4 per cent.

Analysts had expected a 25 bps increase in the repo rate after both retail and wholesale inflation remained high in November. However, the rupee fell on dollar demand from importers to a low of 62.18 before ending at 62.09, a loss of eight paise or 0.13 per cent.

"Rupee was immediately seen appreciating (after RBI policy) but it was a short-lived impact. Later in the session, rupee was seen weakening ahead of the next important event of the day – the Fed's decision on quantitative easing, which will decide the further direction of the market," said Abhishek Goenka, CEO of India Forex Advisors.

The 30-share benchmark Sensex rose 247.72 points, or 1.2 per cent, after six straight days of losses. Foreign institutional investors bought shares worth a net Rs 249.93 crore yesterday, according to provisional data. The dollar index was up 0.07 per cent ahead of the outcome of the US Federal Reserve meeting later today on the future of stimulus measures.