Markets surge ahead of monetary policy review

July 30, 2012 04:52 pm | Updated July 31, 2012 12:02 am IST - Mumbai

Expecting monetary stimulus in the U.S. and Eurozone as well as in the domestic economy, the stock indices gained nearly two per cent on Monday. While the markets have taken a cue from international markets, Indian participants expect a surprise from the Reserve Bank of India (RBI), on Tuesday, when it will review its monetary policy.

The Bombay Stock Exchange (BSE) 30-share index, Sensex, gained 304.49 points at 17143.68.

The rally was led by power stocks which gained 3.58 per cent, followed by realty (3.13 per cent), capital goods (3 per cent) and banks (2.67 per cent).

The broader BSE 100 surged by 1.98 per cent, BSE 200 gained 1.96 per cent and BSE 500 closed up 1.88 per cent. The National Stock Exchange’s 50-share index, Nifty, gained 99.95 points to close at 5199.80.

“I do not think rate cut is expected tomorrow,” said Kishor P. Ostwal, CMD, CNI Research. According to him, rising inflation, weak monsoon and the rupee worry will make things difficult for the RBI. However, some market participants expect a cut in rates when the RBI reviews its policy on Tuesday.

“The RBI may respond by releasing more liquidity by effecting a 0.25 per cent cut in cash reserve ratio, but expectations are very low. ,” said Raamdeo Agrawal, Joint Managing Director, Motilal Oswal Financial Services.

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