Sensex jumps 729 points on surprise 25 bps rate cut by RBI

Benchmark share indices surged over 2% on Thursday led by financials after the RBI in a surprise move before market hours today cut the repo rate by 25 basis points.

The 30-share Sensex provisionally ended up 729 points at 28,076 and the 50-share Nifty ended up 185 points at 8,463.

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(Updated at 2:50PM)
Benchmark indices continue to trade higher by 3% in the late noon trades after the Reserve Bank of India (RBI) unexpectedly cut its policy repo rate by 25 basis points from 8.0 percent to 7.75 percent with immediate effect. 

At 2.50PM, the 30-share Sensex is up 828 points at 28,175 and the 50-share Nifty is up 244 points at 8,521

Expert talk:

Killol Pandya, Senior Fund Mananger, LIC Nomura Mutual Fund says "It is very unorthodox to cut rates outside of policy reviews. Rajan has duly exercised his right. There will be rally in bonds, although in anticipation of more rate cut rates. This is a confirmation that we are in a interest rate softening cycle."
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(updated at 2.30 PM)
The Sensex was up over 700 points while the broader Nifty was seen heading towards 8,500 mark led by bank shares after the RBI in a surprise move before market hours today lowered the repo rate by 25 basis points amid easing inflation and the government's initiatives towards fiscal consolidation.

At 2:30PM, the 30-share Sensex was up 711 points at 28,058 and the 50-share Nifty was up 210 points at 8,487.

The Reserve Bank of India today cut the repo rate by 25 basis points to 7.75% with immediate effect. One basis point is one-hundredth of a percentage point.This is the first repo rate cut since May 2013. The RBI kept the CRR unchanged at 4%.

The move, which had been widely anticipated by economists, comes after WPI inflation for December came in at 0.11%, marginally higher than the flat inflation logged in Novemeber.

"Inflation outcomes have fallen significantly below the 8% targeted by January 2015. On current policy settings, inflation is likely to be below 6% by January 2016.These developments have provided headroom for a shift in the monetary policy stance," RBI governor Raghuram Rajan said in a statement.

RBI has said availability of key inputs like power and land will be needed to ensure that potential output rises above the projected pick-up in growth in coming quarters so as to contain inflation.

The other area that the central bank would be expecting from the budget is the formation of a new monetary policy framework, in line with the recommendations of the Urjit Patel committee, which was formed to revise and strengthen the monetary policy.

Meanwhile, foreign institutional investors were net sellers in Indian equities worth Rs 69.74 crore on Wednesday, as per provisional stock exchange data.

All the sectoral indices were in the green with the BSE Bankex emerging as the top sectoral gainer up 3.3% followed by Realty, Capital Goods, Auto, FMCG, Oil and Gas among others.

Financial shares were among the top gainers led by mortgage lender HDFC up nearly 6% followed by banks such as ICICI Bank, HDFC Bank, SBI and Axis Bank among others.

Auto stocks gained on hopes that lower rates on car loans would boost sales growth in the fourth quarter. M&M gained nearly 4% followed by Maruti Suzuki, Tata Motors, Bajaj Auto and Hero MotoCorp.

Capital Goods stocks are trading higher on expectation of order inflows from power producers. L&T has gained over 4% and BHEL is up 1.5% after bagging an Rs 1,202 crore order for 370 MW gas-based combined cycle power project.

Among index heavyweights, RIL has gained over 2% and ITC was up 2.3% on reports it is planning to set up a biscuits and confectionary manufacturing plant in Odisha with an investment of around Rs 440 crore. However, Hindustan Unilever was the sole Sensex loser down 0.2% after sharp gains in the previous few sessions.

Bharti Airtel has gained over 1%. Media reports suggest that Airtel may have to cough up around Rs 436 crore for merging Airtel Broadband Services which holds the 4G serivces enabling spectrum in Delhi, Mumbai, Kerala and Haryana with itself.

Coal India has gained over 1%. According to media reports, CIL is in talks with Australian companies to access the technologies necessary for mining the coal trapped in loss-making mines.

IT shares were trading with marginal gains following the sharp appreciation in the rupee. Infosys was up 0.7% and Wipro gained 1.7% while TCS gained over 1.6% ahead of its third quarter earnings later today.

Among other shares, Atul soared 9% to Rs 1,485 after the company announced that it has got the US Food and Drug Administration (FDA) approval for the Dapsone manufacture facility located at Valsad, Gujarat.

In the broader market, the BSE Mid-cap and Small-cap indices were up over 1.3% each.

Market breadth was strong with 1,625 gainers and 1,054 losers on the BSE.