Sensex soars as rupee falls

Equity, rupee feel impact of fed optimism on US economy, ECB curbs

Software and banking stocks propelled domestic stock indices to their biggest gains in five months as the rupee weakened to its lowest in more than a week.

This followed the government's decision on Tuesday to curb overseas borrowings by Indian companies.

The US Federal Reserve's optimism on the US economy and big purchases by foreign and domestic institutions also helped the market rebound.

The benchmark Sensex gained 375.21 points, or 2.51 per cent, to 15,307.98. The previous biggest single-day gain was on March 8, when the index rose 469.6, or 3.03 per cent. The broader S&P CNX Nifty shot up by 105.75 points or 2.43 per cent to 4,462.10. 

TOP BANKING AND IT GAINERS
Name	7 Aug (in Rs)	8 Aug (in Rs)	% chg
Banks
ING Vysya Bank	240.25	262.00	9.05
IDBI	112.30	120.90	7.66
Dena Bank	55.00	58.00	5.45
IndusInd Bank	48.50	51.00	5.15
Union Bank of India	148.80	156.05	4.87
IT companies
Polaris Software	106.75	120.05	12.46
HCL Technologies	298.05	317.00	6.36
iGate Global Solutions	233.95	248.75	6.33
Mphasis	285.35	302.95	6.17
Infosys Technologies	1878.75	1967.60	4.73

Other Asian markets also rebounded from an eight- week low after the Federal Reserve said the US economy would probably weather the subprime mortgage defaults.

"Our view is that the rupee will not go down below 40.25 (against the US dollar) in the next two quarters. A correction was overdue, which we feel is over," said Jignesh Desai, head of institutional sales at SBI Cap Securities.

The rupee, which fell 0.4 per cent to 40.575 against the dollar, triggered big buying in software companies including index heavyweights Infosys Technologies (up 4.13 per cent to Rs 1,967.60), Tata Consultancy Services (4.13 per cent to Rs 1,153.70), Wipro Technology (3.69 per cent to Rs 476.25) and Satyam Computers (3.52 per cent to Rs 479.30). The BSE IT Index rose by 4.11 per cent "" its sharpest single day in five months.

Software companies, which earn an overwhelming part of their revenues in dollars, have been underperformers in the market following the rise of 9.1 per cent in the rupee against the US dollar this year.

Analysts estimate every 1 per cent rise in the rupee, which hit a nine-year high of 40.20 per dollar last month, shaves 30-50 basis points from the operating margins of software services firms, which do much of their business in the US.

Banking stocks also gained after analysts felt that their loan disbursements will rise following the curb in ECBs. HDFC, which gained 4.68 per cent to Rs 2,065.95, was the second-sharpest riser among the 30 Sensex stocks, after Infosys. State Bank of India rose 2 per cent, to Rs 1,715.

ICICI Bank Ltd rose 1.4 per cent, to Rs 882.6.

"The government move to curb external commercial borrowings was the major trigger for the rally today. A total of $10 billion have come in through this route in the six months from October last year to March 2007," said Arpit Agarwal, head of research, Arihant Capital Market.

Net overseas borrowings by companies surged almost six fold to $16.1 billion in the year ended March 31 from the previous year, according to the Reserve Bank of India.

Banking stocks also gained after analysts felt that their loan disbursements will rise following the curb in ECBs. HDFC, which gained 4.68 per cent to Rs 2,065.95, was the second sharpest riser among the 30 Sensex stocks, after Infosys. State Bank of India rose 2 per cent, to Rs 1,715 rupees. ICICI Bank Ltd rose 1.4 per cent, to Rs 882.6.

ACC (up 3.98 per cent to Rs 1,025) and Reliance Industries (up 3.87 per cent to Rs 1,875.65) were among the top five gainers on the benchmark index.

But even in the rising market, one out of four stocks fell today Out of the total 2724 shares traded on BSE, gainers were 1979 and 697 were losers, 48 were unchanged Analysts said there was big short covering by punters, fearing further rally in coming sessions, if the US markets rise on Wednesday.