Thursday, December 4, 2008

Post- Market Commentary Thursday, December 04, 2008

Sensex rallies on rate cut, stimulus hopes

Indian stock market indices Thursday outperformed other Asian peers as sentiments turned bullish on expectations of a fiscal stimulus and interest rate cuts by the weekend. Fall in domestic inflation and a positive tick in European markets provided further support.

Market broke out of narrow range and started moving higher as traders took positions in interest rate sensitive sectors.


A high-powered committee headed by the prime minister is said to be planning a stimulus package for the economy hit by the global financial crisis and demand slowdown. The package would add up to around Rs 75,000 crore, including use of up to $10 billion of forex reserves for funding infrastructure projects, lines of credit to banks and allowing non-banking financial companies to access foreign loans.

The commercial vehicle industry could receive respite in the form of reduced excise duty. An announcement on cuts in repo rate and reverse repo rate is also expected from RBI on Saturday. Also, external commercial borrowing norms may be relaxed to allow industry to source funds outside the country.

By afternoon, the rally intensified as traders welcomed the fall in inflation. WPI inflation rate for the week to Nov 22 fell further to 8.40 per cent from 8.84 per cent a week earlier and against forecasts of 8.91 per cent. Traders also took cues from positive opening of European markets.

“We surged on hopes of economic package and positive global markets. Traders were expecting a stimulus package for the past 2-3 weeks, which is likely to be announced Saturday,” said DD Sharma, vice president, Anand Rathi Securities.

However he cautioned that “results of assembly elections may dampen sentiments and global trend will also drive the market. It also needs to be seen whether cuts are significant or not. If they turn out to be lower than expectations then the market may even falter.”

Bombay Stock Exchange’s Sensex closed at 9,229.75, up 482.32 points or 5.51 per cent. The 30-share index touched an intra-day high of 9245.06 and a low of 8726.71.

National Stock Exchange’s Nifty ended at 2788, up 4.95 per cent or 131.55 points. The broader index hit an intra-day high of 2793.80 and a low of 2646.35.

BSE Midcap Index was 3.26 per cent up and BSE Smallcap Index moved 2.04 per cent higher.

Strong gains in Tata Steel (13.84%), Jaiprakash Associates (13.77%), Tata Motors (13.29%), DLF (11.28%) and Sterlite Industries (9.9%) propelled the indices higher.

There were no laggards in the 30-share index, and market breadth across BSE remained positive with 1,503 advances against 668 declines.

In Europe, markets were higher on expectations that bank of England would soon announce a big rate cut after Sweden's central bank made a surprise 175 basis point rate cut and New Zealand cut rates by 150 bps.

However, US stock futures were mixed. Dow Jones futures were down 0.03 per cent, S&P 500 edged 0.06 per cent up and Nasdaq moved up 0.13 per cent.

via:E.T

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