The stock markets, on Wednesday, staged a strong rally, with indices reaching high levels. The recent fall in inflation, markets believe, would result in the central bank reducing interest rates. This boosted the sentiment on bourses.
The Bombay Stock Exchange benchmark index, Sensex, surged by 490.67 points to close at 20212.96.
The rally was led by the realty stocks, which gained by 4.04 per cent, followed by banks 3.95 per cent, capital goods 3 per cent, PSUs 2.36 per cent and automobile 2.29 per cent. All sectoral indices ended in the positive territory— indicating a wide-spread rise in the stock prices.
The BSE 100 gained 2.43 per cent. The BSE 200 was up by 2.33 per cent. The BSE 500 closed up by 2.23 per cent.
The National Stock Exchange index, Nifty, closed at 6146.75 with a gain of 151.35 points.
“Strong global markets ensured a gap-up opening on NSE with the Nifty rising continuously through the day and testing 6150 (+) levels towards the end of the trading session,” said Jayant Manglik, President - Retail Distribution, Religare Securities Ltd. Volumes also rose along with the market, indicating increased retail interest though it is too early to call, he added.
While this rally is not yet an indication of any trend, reduced inflation has increased expectations of lower interest rates in India.
“The market staged a strong rally today with the Nifty reaching its highest level since 2011. The strength of the rally took everyone by surprise. Global as well as domestic factors have been at play,” said Sanjeev Zarbade, Vice President- Private Client Group Research, Kotak Securities.
“Clearly, the rally has been partly fuelled by heightened expectations of further easing by the central bank going forward.
“Thus, we saw heavy buying interest in rate sensitive stocks including banks, auto and property,” said Mr. Zarbade. Several interest rate-sensitive stocks have moved up in anticipation of aggressive rate cuts by RBI.
The rupee, on Wednesday, managed to erase early losses, and settle 3 paise higher at 54.78 amid signs of massive capital inflows.