Boost from focus on large caps, pivotals

Index heavyweights Reliance, ITC, HLL led Friday's rally

A decline in the inflation rate, and a shift in focus away from mid-cap stocks to large cap and index stocks helped the markets end 1.52 per cent (83.47 points) higher at 5561.15, the highest close since May 7.

Thus, the Sensex has gained 1,055 points since Black Monday May 17, 2004.

Yesterday's rally was led by index heavyweights Reliance Industries, ITC, HLL, banks and auto sector stocks.

Brokers said a dip in the inflation rate to 7.81 per cent and strong buying by institutional investors in frontline stocks has resulted in sharp gains in the markets over the past two days.

In the last two days, the Sensex has gained 141 points. However, there could be some correction which would be healthy for the markets, the brokers added.

The annual wholesale price inflation fell to 7.81 per cent for the week ended 4 September compared to 8.33 per cent in the previous week.

A senior executive with a leading broking firm said "The possibility of interest rates rising has receded as the inflation rate should stabilise in the next two weeks, with oil prices under check."

Among the sectoral indices, BSE Bankex was the biggest gainer followed by the BSE FMCG index.

Jignesh Shah, portfolio manager, ASK Raymond James Securities said, "Fundamentally, the markets are looking strong with inflation coming down, interest rates stabilising and economy showing signs of growth. This has resulted in strong institutional participation in the market."

The Reliance Industries scrip was up 3.72 per cent to Rs 509.25, ITC stock was up 2.79 per cent to Rs 1,174.10, ONGC was up 2.23 per cent to Rs 746.40 and Hindustan Lever ended 1.62 per cent higher to Rs 125.75 on renewed buying.

Mihir Vora, vice president, head equities, ABN Amro MF said, "The large cap stocks has started witnessing strong institutional buying over the past few days."

The FIIs were net buyers to the tune of Rs 148.5 crore on Thursday, while mutual funds bought equities worth Rs 12.2 crore.

Bank stocks rallied after the central bank said on Thursday it would consider letting them raise capital by issuing preference shares.

The State Bank of India scrip rose 3.3 per cent to Rs 480.50. The ICICI Bank scrip was up 3.38 per cent to Rs 275 and HDFC Bank was up 1.80 per cent to Rs 402.40. The Bankex jumped 70.79 points, or 2.70 per cent to end at 2,692.47.