India’s key stock indices on Wednesday logged their sharpest daily jump in percentage terms since January 3 amid a global rally on expectations of further stimulus measures from the European Central Bank (ECB) to tackle the euro zone's debt crisis.
The ECB, however, didn’t play ball and played down prospects of a third round of long-term money creation. ECB President Mario Draghi said it was wrong for monetary policy to fill a policy vacuum created by others and kept interest rates unchanged at one per cent. Draghi’s statement came after the close of trading in Indian markets. The markets still hope the ECB will take some action in the near future.
What boosted sentiment in the Indian markets further were continued hopes of an interest rate cut when the Reserve Bank of India (RBI) meets on June 18 and Prime Minister Manmohan Singh’s decision to hold a meeting on stalled infrastructure projects.
The Bombay Stock Exchange (BSE) benchmark, the 30-stock Sensex, surged 2.71 per cent, or 433.66 points, to 16,454.30. As many as 12 stocks jumped more than three per cent each.
The 50-stock Nifty index of the National Stock Exchange (NSE) jumped 2.75 per cent, or 133.80 points, to 4,997.10.
Both Foreign and domestic institutional investors were buyers on Wednesday. They together bought shares worth Rs 758.35 crore, provisional data on the BSE website showed.
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Data compiled by BS Research Bureau
Source: Bloomberg
“A combination of global and domestic factors helped our markets today,” said Rikesh Parikh, vice-president, equities, Motilal Oswal Financial Services. “In the second part of the trading session, short-covering was witnessed, which fuelled the rally. If crude oil continues to trade below $100 and the rupee firms up, it will augur well for the Indian market.”
Stock markets in Asia and Europe gained between 1.5 per cent and two per cent on Wednesday, as expectations grew European officials would explore ways to rescue Spain's debt-stricken banks and on hopes of further stimulus from the ECB.
Fears that the problems in Europe are hurting the global economy have increased speculation that major central banks could join in another global round of policy easing.
“In the past couple of days, Indian markets have turned fairly resilient. Moreover, with indications the government is now getting into action mode had a positive impact,” said Sailav Kaji, director, institutional equities, and chief strategist, Padmakshi Financial Services.
The market breadth was positive, with more than two stocks advancing on the BSE for every stock that declined.
Major infrastructure stocks like L&T, Punj Lloyd, GVK Power & Infrastructure and GMR Infra gained 4-11 per cent ahead of the PM’s meeting.
Rate-cut hopes lifted stocks in interest rate-sensitive sectors like banking and auto. SBI rose 3.6 per cent to Rs 2,158.25, HDFC Bank 3.7 per cent to Rs 519.9 and ICICI Bank 2.1 per cent to Rs 808.4.
Among auto stocks, Tata Motors rose 5.8 per cent to Rs 234.4, Maruti Suzuki 2.7 per cent to Rs 1,107.95 and Hero Motocorp 4.8 per cent to Rs 1,955.05.