Sensex up 95 pts as fall in inflation revives rate cut hopes
The Sensex shrugged off initial hesitancy and climbed to a fresh five-month high of 17,728.20 on Tuesday after gaining nearly 95 points on renewed hopes of rate cut by the Reserve Bank following lower-than-expected fall in July inflation numbers.
The BSE benchmark index opened flat on mixed global cues and touched the day's low of 17,572.34 -- down 61 points over yesterday's close -- amid investors expecting July wholesale price index based inflation would be at 7.3 per cent level. The government data, however, showed inflation declined to 6.87 per cent.
This is the first time the number fell below 7 per cent in over 30 months. Markets rejoiced it with Sensex moving up. It settled the day 94.75 points up at 17,728.20, a level last seen on March 15.
"Inflation numbers came out lower than street estimates. This moderation raises expectation for some monetary easing," said Milan Bavishi, Head Research, Inventure Growth & Securities.
The rise was led by stocks of refiners, banks and metal sectors. The gainers in 30-share Sensex were led by Tata Motors, Tata Steel, Jindal Steel and ICICI Bank which gained in th 2-3 per cent range. ONGC, Gail and RIL also gained.
Brokers said, after a weak start, the sentiment improved as inflation numbers came in lower-than-expected. Investors ignored reports that exports in July have seen the steepest fall in three years to USD 22.4 billion.
If CPI inflation shows easing signs when it is released on August 21, the RBI may lower repo rate in its September 17 monetary policy meeting, fund managers said.
The 50-share National Stock Exchange index Nifty rose by 32.45 points, or 0.61 per cent to 5,380.35, after touching a day's high of 5,387.05. Traders also said that the domestic market received further support today on firming global stock markets.
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