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The BSE Sensex on Friday recorded new highs, led by a surge in lenders on expectations that the central bank would ease interest rates at its policy review on Tuesday. The hopes were stoked by a sharp decline in crude oil prices.
The 30-share S&P BSE Sensex climbed 383 points, or 1.3 per cent to a life high of 28,822 and ended at 28,693 points, up 0.9 per cent. The NSE Nifty ended the day up 1.1 per cent or 94 points at 8,588.
Participants said hopes of an RBI rate cut had intensified as crude oil prices had fallen to about $70 a barrel, nearly a four-year four-year low, after the Organization of the Petroleum Exporting Countries refused to bring down production despite falling prices.
“The expectation that there will be a rate cut in the RBI policy next week has been built into the market. Markets are also taking a long-term view of the fall in crude prices, that it will remain low for a long time,” said Dipen Shah, head of the private client group at Kotak Securities.
The CNX Bank Nifty gained 2.7 per cent, bringing its monthly gain to about eight per cent. Banks were among the biggest gainers with state-owned lenders Punjab National Bank and Bank of Baroda climbing 7.7 and 7.5 per cent, respectively. State Bank of India rose 5.3 per cent.
Investors also celebrated the fall in crude oil prices by stocking on shares of oil marketing, paint and airline companies. Hindustan Petroelum saw its stock rise 8.9 per cent and Bharat Petroleum by 3.5 per cent. Jet Airways and SpiceJet surged nearly 20 per cent each on hopes that the drop in fuel cost would improve earnings.
“We think the next two years will be an era of low oil prices, as these are unlikely to go up substantially. Raw material prices could come down sharply, pushing up profits for most of these companies,” said Gaurav Bhandari, senior vice-president, Centrum Capital.
Asian Paints, one such beneficiary of crude as a raw material, was among the top gainers in the Nifty, gaining 5.7 per cent to Rs 746.05. Index heavyweight Reliance Industries surged three per cent to Rs 1,016.20 a share, after the Comptroller and Auditor General allowed the company to recover $160 million of the costs incurred on the KG-D6 block. The stock saw a sharp spike in the first half of the trade session but pared some of the gains by the end, settling at Rs 990.85 up 0.4 per cent.
Most BSE sectoral indices gained on Friday, while the midcap index outperformed the benchmark indices.
Foreign portfolio investors were net buyers of equity worth Rs 935 crore, while domestic institutions were net sellers at Rs 439 crore.
