Sensex closes above 10k as inflation eases on 18th Dec'08

18 Dec 2008, 1811 hrs

A lower than expected inflation rate came as a shot in arm for Indian equities which had run out of gas after a recent pull-back rally.

Led by gains in interest rate sensitive sectors like realty and banking stocks, the benchmark indices closed sharply higher Thursday.

After 24 trading sessions, the 30-share Sensex managed to close above the 10,000 mark. The BSE benchmark surged 361.14 points or 3.72 per cent to end at 10,076.43. The index touched an intra-day high of 10,110.34 and a low of 9633.04.

National Stock Exchange’s Nifty closed the day at 3059.50, up 3.56 per cent or 105.15 points. The 50-share index hit an intra-day high of 3072.55 and a low of 2922.65.

Markets opened flat tracking subdued global markets and due to lack of any fresh trigger to push the markets either ways, except for the inflation data for the week ended Dec 6 which was seen around 7.49 per cent against 8 per cent earlier.

Thus, the figure of 6.84 per cent brought much cheer to the market. The sharp fall in inflation was mainly on account of decline in international oil&gas prices, and analysts are of the opinion expect another steep decline in coming weeks due to falling commodities prices and fiscal measures kick in.

“While inflation is lower, the positive effect from it will take some time to show on the economy. The pull-back in the market was sentimental. But the key takeway was volume (both cash and F&O) which was above average and that’s a good sign. Trend looks positive for the moment. We are likely to touch higher levels with intermittent bouts of profit taking,” said Sharmila Joshi, vice president institutional sales, Sytematix Shares & Stocks.

Following the sharp decline in inflation, marketmen are positive the RBI may cut interest rates by next month, by as much as 100 basis points. This led to surge in realty and banking stocks. Among sectoral indices, realty spearheaded the rally with the BSE Realty Index up 7.27 per cent, followed by BSE Bankex up 7.06 per cent and BSE Power Index up 5.81 per cent.

Shares of oil drilling companies were under pressure after OPEC’s decision to cut oil output by 2.2 million barrels per day failed to lift oil prices. US crude hovered near $40 per barrel Thursday after hitting a low of $39.19, its lowest price since July 2004. However, the BSE Oil & Gas Index ended 1.89 per cent higher as oil marketing companies gained from this.


Biggest Sensex gainers were DLF (9.56%), Jaiprakash Associates (9.36%), Reliance Infrastructure (9.32%), ICICI Bank (9.16%), and State Bank of India (7.88%), while Grasim (-0.33%) and Sterlite (-0.11%) were the only laggards.

However, broader market indices were a bit slow on the rise. The BSE Midcap Index closed 2.18 percent higher, while the BSE Smallcap Index rose only 0.91 percent over its previous close. But there was stock specific action.

McNally Bharat Engineering ended up 11.58 per cent to Rs 40.95 on BSE on receiving two orders from Vedanta Group worth Rs 244 crore. Patel Engineering closed 9.70 per cent higher at Rs 179.20 after its consortium bagged an irrigation project worth Rs 3,859 crore form Andhra Pradesh government.

Tata Power shares ended up 3.41 per cent at Rs 726.90 on the company entering into a joint venture with Indian Oil Corporation for a coal-based power plant in Orissa to meet the captive requirement of IOC. The JV will start operating only after IOC board approves the investment in the refinery cum petrochemical project at Paradip. Tata Power will hold 74 per cent stake and the rest will be held by IOC.

Market breadth on BSE showed 1,490 advances against 966 declines.

Meanwhile, European markets were mixed and US markets were seen opening higher going by the stock futures. Dow Jones stock futures were up 0.50 per cent and S&P 500 up by similar 0.49 per cent.