A surprise rate cut by the RBI this week provided a big boost for the stock markets and sent the key indices soaring to nearly one-and-a-half months high on the back of robust gains in realty, banking and auto segments.
The benchmark S&P BSE Sensex vaulted by over 663 points to end at 1-1/2-month high of 28,121.89. Similarly, the wide-based CNX Nifty of the NSE crossed 8,500-mark for the first time after a month and ended at 8,513.80, a gain of 229.30 points, or 2.77 per cent, over the last weekend close.
The Reserve Bank of India (RBI) on Thursday morning lowered the benchmark repurchase rate (repo) under the liquidity adjustment facility (LAF) by 25 bps to 7.75 per cent, the first reduction since May 2013, on easing inflation.
On that day, the Sensex registered its biggest single- day rally in over five years and zoomed a whopping 728.73 points , or 2.66 per cent, on massive across-the-board buying.
Fall in the repo rate may provide leeway to banks to cut their lending rates to improve liquidity in housing and auto sectors, leading to more off-take of money by public and corporate sectors.
Soon after the RBI move, a clutch of banks lowered their base rate (minimum lending rate), while some others, including the biggie SBI, indicated they will follow suit.
Investor wealth reclaimed the Rs 100-lakh crore mark for the second time. However, it was for the first time it remained above that level at close of trading. During the week, investors got rich by Rs 3,11,737 crore.
The BSE 30-share barometer resumed the week on a firm note but fell to a low of 27,203.25 in the mid-week on drop in the brent crude prices to USD 45 a barrel, a six-year low, amid ebbing hopes of a rate cut after retail inflation slightly rose to 5 per cent in December and industrial production (IIP) grew 3.8 per cent in November.
