The Hindu Business Line : Sensex closes above 10,000 on lower inflation, new package

Mumbai, Dec. 18 Fall in inflation figures steeper than the market expectations, reports about the Government considering a second stimulus package and speculation about another rate cut by RBI, boosted sentiments in the stock market on Thursday.

The benchmark Sensex closed above the 10,000-mark after a gap of more than a month at 10,076 with a gain of 361 points. The Nifty also closed well above the 3,000-mark at 3,060 with a gain of 106 points.

Inflation dipped to a nine-month low of 6.84 per cent for the week ended December 6, lower than the market expectations of 7.4 per cent – from 8 per cent in the previous week.

Brokers said the market, which opened flat on weak overseas cues and soon entered in a volatile session, got a boost from news of more sops from the Government in the form of food and fertiliser subsidy. The lower inflation numbers that came after that triggered fresh buying support, they said.

The rate-sensitive sectors such as banking, realty and auto moved up by 3-7 per cent after the news of lower inflation rate raised hopes of another cut in interest rates. Inflation had touched as high as 12.91 per cent in August this year.

The BSE Realty and Bankex gained over 7 per cent while BSE Capital Goods and auto indices gained between 3 and 5 per cent.

The Sensex today outperformed other Asian indices with a gain of 3.72 per cent. The benchmark Japanese Nikkei closed up just 0.64 per cent; the Hong Kong, Hang Seng (0.24 per cent); the Korean Kospi (0.53); and the Singapore(1.10 per cent). The Indonesian index closed with loss of 0.90 per cent.

The Sensex opened just five points up at 9,710 and then turned negative touching a low of 9,633 taking a cue from the weaker overnight US market and subdued trend in the Asian markets but staged a sharp upward move from that level after the inflation data was released around 11 a.m.

“While the market has already factored in a lot of negatives, the positive surprise like the lower than expected inflation number came as a buying trigger,” said Mr Amitabh Chakraborty, President (Equity), Religare Securities.

“There was good institutional participation and short covering by them after the inflation numbers came in,” said Mr Chakraborty.

The proprietary traders (brokers) were net buyers of stocks worth Rs 176.47 crore, according to the provisional data provided by the stock exchange. The domestic institutional investors as well as the foreign institutional investors were net sellers of equities worth Rs 356 crore and Rs 33 crore respectively.

Participation of FIIs and DIIs in today’s trading was at much higher level as compared to the last week.

The turnover in the cash market on the NSE and BSE also was much higher at Rs 13,363 crore and Rs 5,095 crore respectively.

“Expectation of lower interest rate and inflation as well as another round of fiscal sops is driving the stocks up,” said Mr Satish Ramanthan, Head of Equities, Sundaram BNP Paribas Mutual Fund.