Benchmark posts biggest gain in 4 years, flirts with 20,000; rupee strengthens

The bull rampage continued for the fourth day on D-Street as the rupee recovered sharply and the August trade deficit shrank.

The rally got a boost from tensions over Syria easing. The US staying its hand implies that world economies will not be faced with the burden of a rising crude oil price that can skew government budgets.

The Sensex ended the day at 19,997, up 727 points or 3.77 per cent while Nifty settled at 5,897, up 216 points or 3.81 per cent.

The rise was the biggest in absolute terms since the Sensex surged 2,110.79 points on May 18, 2009, when the UPA Government came back to power. On the BSE, sectoral indices such as auto, capital goods and FMCG rallied over five per cent.

Rupee firms up

The rupee ended on Tuesday at a two-week high of 63.84 a dollar recovering from the record lows it hit last month. The American currency turned weak on downbeat job data. In four straight trading sessions, the rupee gained 379 paise or about six per cent.

According to SEBI data, FIIs pumped Rs 1,280 crore into equity and Rs 670 crore into debt on Tuesday.

India’s trade deficit in August narrowed to $10.9 billion, with exports surging 13 per cent and imports remaining flat. A delay or no military action by the US in Syria will help ease the prices of crude oil that forms a major part of India’s imports.

A series of recent measures by the RBI led to the sharp rise in the domestic unit. In the opening session, the rupee gained 82 paise to open stronger at 64.42/dollar against Friday’s close of 65.24. The domestic unit touched a low of 64.50 and a high of 63.80.

According to N. S. Venkatesh, head of treasury at IDBI Bank, “Heavy dollar selling by custodian banks, a surge in the equity markets, the measures announced for exporters contributed to the gains in the rupee. It may strengthen to 61 levels in the short term.”

Bond yields fell sharply to 8.47 per cent, ending a two-day rising streak helped by a sharp rally in the rupee and a drop in global crude oil prices. The 7.16 per cent government bond, which matures in 2023, ended higher at Rs 91.41 from Friday’s close of Rs 90.45.

However, Alex Mathews, Head Research, Geojit BNP Paribas Financial Services, said: “Upcoming events such as FMC meeting in the US, IIP data and RBI policy will decide the market direction. But if the present rally sustains and the renewed optimism of the past few days hold good then we may see retail investors too returning to the markets.”

(This article was published on September 10, 2013)
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