Sensex gains on GAAR deferral

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Markets staged a spectacular rally on Monday to touch their two-year high as a slower than expected growth in December inflation figures fuelled hopes of a rate cut by the Reserve Bank of India (RBI) in its forthcoming policy meeting. Additionally, the government’s decision to defer the implementation of the controversial general anti -avoidance rules (GAAR), which seeks to tax foreign investors provided further spark to the rally.
The Sensex after opening the week on a positive note climbed 242.77 points or 1.23 per cent to end the trading session at 19,906.41, less than 100 points away from the psychological 20,000 level. The Nifty closed the day at 6,024.05, up 72.75 points or 1.22 per cent.
“With inflation having significantly undershot the Reserve Bank of India’s (RBI) projections of 8 per cent in December, market sentiments have further improved as this boosts the immediate scope of RBI reducing interest rates to revive the economy in the coming policy. We expect RBI to cut rates over the next 3 months to the extent of 50- 75 basis points,” commented Mr Rahul Goswami, chief investment officer (CIO), fixed income, ICICI Prudential AMC.
The easing of inflation to a three year low attracted strong buying interest in the rate sensitive realty and banking sector while a better than expected quarterly numbers from Infosys Technologies last week extended the rally in the IT sector stocks. Led by DLF and Unitech, which were up 7.72 per cent and 4.71 per cent respectively, the BSE Realty index became the biggest gainer among the sectoral indices climbing 5.01 per cent. Infosys inched up further by 3.49 per cent as foreign brokerages J.P Morgan and Citi recommended buy rating for the stock.
The provisional data from stock exchanges showed that foreign institutional investors purchased shares worth611.10 crore on Monday.