The markets welcomed Reserve Bank of India’s new Governor Raghuram Rajan and his agenda, read out at a press conference on Wednesday, by pushing up prices of stocks and the value of the rupee.
The rupee closed at 66.01 compared to its previous close of 67.06 on Wednesday. Intra-day, the rupee touched a high of 65.53 to the dollar.
To support the rupee, Dr. Rajan on Wednesday announced steps such as enhanced limits for exporters to re-book cancelled forward exchange contracts and a special concessional window to swap foreign currency non-resident (FCNR)deposits.
The rupee started the day strong at 66 a dollar from the previous close of 67.07 at the inter-bank foreign exchange market and moved in a range of 65.54 to 66.52 before ending at 66.01, a rise of 106 paise or 1.58 per cent. On Wednesday, it had risen 56 paise.
The S&P BSE Sensex shot up by 412.21 points or 2.22 per cent to close at 18,979.76. The rally was led by bank stocks, which were depressed for a long time followed by realty (5.41 per cent), consumer durables (4.54 per cent), PSUs (4.50 per cent), capital goods (3.48 per cent), fast moving consumer goods (2.78 per cent) and oil & gas (2.02 per cent).
However, information technology stocks lost 2.95 per cent and healthcare 0.22 per cent. Mid-cap stocks gained 1.69 per cent and small-cap 1.52 per cent.
Among broader indices, BSE 100 surged by 2.45 per cent, BSE 200 by 2.36 per cent and BSE 500 by 2.29 per cent.
Nifty up 144.85 points
The 50-share Nifty of the National Stock Exchange closed at 5592.95 with a gain of 144.85 points or 2.66 per cent.
Dr. Rajan’s carefully scripted speech at his first press conference stressed that the RBI would aim to be more transparent and predictable in the coming months and would not hesitate to take all possible measures to stabilise the rupee.
Main objective
“The RBI governor’s enthusiastic words seemed to calm the markets,” said Mr. Raghu Kumar, co-founder, RKSV, a brokerage firm. “Despite Dr. Rajan’s words, the public will have to wait and see what actions the RBI actually takes in the coming weeks and months,” said Mr. Kumar, adding, “If the RBI does not act quickly and decisively, the public might lose patience.”
“Reactions to Dr. Rajan’s statement have been overly positive with markets probably interpreting his stance on monetary policy as reversal of the monetary tightening implemented by his predecessor, D. Subbarao,” said Dhananjay Sinha, Head Institutional Research, Emkay Global.
“We believe that there is very little in Dr. Rajan’s speech indicating reversal of monetary policy stance as he continues to remain focussed on inflation and inflation expectation and seems more open to currency flexibility,” said Mr. Sinha. He also added that the emphasis on ensuring predictability and stability in monetary policy does not mean easing and surely cannot be guaranteed unless RBI has perfect foresight models, which is difficult in the current context of the global financial market spill-over which calls for nimbleness on RBI’s part to react to global disturbances.
Asian stocks ended higher following overnight gains on Wall Street. Key indices in Hong Kong, Japan, South Korea, Singapore and Taiwan rose while the Shanghai Composite fell.
