Indian stocks rose after China slashed its key lending rates and the US committed $800 billion to unfreeze lending, thereby boosting optimism that the global economy will weather the recession.
Reliance Industries (RIL) and ICICI Bank led gains amongst the largest stocks on heightened speculation that India will follow other countries in easing interest rates.
“With China cutting interest rates, it’s increasingly likely that India and other economies will follow suit,’’ said Ajay Bodke, who helps manage the equivalent of $872 million of stocks at IDFC Assets Management Company in Mumbai. “India’s central bank could cut reserve requirements by 1 percentage point and interest rates by 0.5-0.75 percentage point.’’
The Bombay Stock Exchange (BSE) benchmark, Sensex, rose 331.19 points, or 3.8 per cent, to 9,026.72, the most since November 21. The S&P CNX Nifty Index on the National Stock Exchange (NSE) added 98.25 points, or 3.7 per cent, to 2,752.25 points. The BSE 200 Index climbed 2.9 per cent to 1,057.41 points. Nifty for November delivery rose 3.7 per cent to 2,749.35 points.
Reliance, the nation’s most valuable company, gained 6.3 per cent to Rs 1,138.90, the most since November 21. ICICI Bank, the nation’s second-largest lender, added 9.3 per cent to Rs 350.85, the most since October 31. HDFC Bank, the third-largest lender, gained 8.5 per cent to Rs 906.05, the most since October 13.
The key one-year lending rate will drop 108 basis points to 5.58 per cent, the People’s Bank of China said on its website on Wednesday. That’s the biggest rate cut in 11 years. The deposit rate will fall by the same amount to 2.52 per cent. The changes are effective tomorrow.
The US Federal Reserve will purchase as much as $600 billion of debt issued or backed by government-chartered housing-finance companies. It will also set up a $200 billion program to support consumer and small-business loans, the central bank said in statements yesterday.
Sterlite Industries, the nation’s largest copper producer, added 13 per cent to Rs 231.25 as prices of the commodity climbed after China cut interest rates, reviving speculation of a rebound in economic growth that may spur demand for industrial metals.
Aluminum for delivery in three months rose $1 to $1,811 a metric tonne as of 9:06 am on the London Metal Exchange (LME) and copper gained $40 to $3,735 a tonne. Aluminum earlier dropped $15.25 and copper had been down $80.
Nalco, India’s biggest state-run producer of the metal, rose 6.2 per cent to Rs 188.10, its highest since October 23. Tata Steel, India’s biggest maker of the alloy, climbed 3.2 per cent to Rs 155.50, while Steel Authority of India (SAIL) gained 8.1 per cent to Rs 68.70.
