Despite slowing industrial output and Standard & Poor's warning that India could be the first BRIC country to lose its investment grade rating, stock indices surged on Tuesday on hopes that the Reserve Bank of India (RBI) would cut the Cash Reserve Ratio (CRR) as well as the Repo rate to stimulate growth when it reviewed its policy on June 18.
Rupee drops 7 paise
Meanwhile, the flat industrial output data dragged the rupee down for a third consecutive trading day on Tuesday. The rupee closed at 55.80/81 on Tuesday against Monday's close of 55.73/74 a dollar. It dipped to 56.08 intra-day, recording its lowest since June 1.
The rupee touched the historically low level of 56.52 on May 31.
The Bombay Stock Exchange (BSE) 30-share Sensitive index (Sensex) gained 194.79 points or 1.17 per cent to close at 16862.80 on Tuesday, its highest close in over a month. The rally was led by realty stocks (up by 2.01 per cent), banks (1.90 per cent), capital goods (1.84 per cent), automobile (1.76 per cent), consumer durables (1.52 per cent) and PSUs (1.34 per cent).
Except the healthcare sector, which was down by 0.40 per cent, all other sectoral indices ended in the positive territory.
On the National Stock Exchange (NSE), the broader 50-share Nifty closed at 5115.90, up 61.80 points.
The reported comment from Financial Services Secretary D. K. Mittal that the public sector banks would welcome a one percentage point cut in the CRR by the RBI in its review of the policy next week, boosted sentiment in the market. Industrial production growth continues to remain weak, and, in April, it grew just 0.1 per cent from a year earlier. Mining and capital goods segments continued to be the laggards pulling down the overall IIP index growth.