Inflation ease cheers rate sensitives, Sensex up 257 pts

Moneycontrol Bureau

The market staged stellar performance on Wednesday with the equity benchmarks closing at two-week high. Fall in inflation by 136 basis points in December raised hopes that RBI may not touch policy rates on January 28.

The 30-share BSE Sensex advanced 256.61 points or 1.22 percent to 21,289.49 while the 50-share NSE Nifty closed above the 6,300-mark for the first time since January 1. It rallied 79.05 points or 1.27 percent to 6,320.90, the highest level since December 10, 2013.

The broader markets underperformed benchmarks with the BSE Midcap and Smallcap indices gaining 0.2-0.3 percent. Advancing shares outnumbered declining ones by a ratio of 1349 to 1275 on the BSE.

Experts said the rally was completely on hopes of no rate hike by RBI in its forthcoming policy on January 28 after inflation eased to five-month low and positive global cues, but they believe the ground realities have not changed yet.

They are still advising clients to use strategy “sell on every rally”.

Dipen Shah, senior vice president and head- PCG Research, Kotak Securities believes the market can see a significant rally if the inflation numbers fall to manageable levels and some growth is seen in the GDP.

Speaking to CNBC-TV18, Shah said the ground level realities, however, haven’t changed and no new projects have been announced either.

Meanwhile, Dilip Bhat, Joint-MD of Prabhudas Lilladher remains apprehensive on the higher side. He still feels that it will be a sell on rise market because the ground realities still seem to be pretty much away from the way the market is moving at the moment.

The wholesale price index (WPI) for December fell to 6.16 percent compared to previous month’s figure of 7.52 percent, and economists’ average expectation of 7.1 percent, driven largely by softening in vegetable prices.

In conjunction with Monday’s consumer inflation number, which stood at 9.87 percent, it confirms the hypothesis of RBI Governor Raghuram Rajan’s, who chose to not pull the trigger on interest rates in December, expecting prices to fall.

Economists said the release likely rules out the possibility of an interest rate hike when the central bank meets on January 28. “In fact, we could even see an interest rate cut in March if the trend continues,” said Madan Sabnavis, Chief Economist, CARE Ratings.

Stocks In Action

It was a broadbased rally. BSE Capital Goods, Bank, Realty, Auto and Metal indices gained between 1-2 percent while Healthcare index closed flat.

Country’s largest private sector lender ICICI Bank rallied 2 percent while its rivals State Bank of India and HDFC Bank rose a percent each. Housing finance major HDFC soared 2.56 percent.

YES Bank spiked 2 percent. Net profit of the bank jumped 21.4 percent year-on-year, higher-than-expected, to Rs 415.6 crore supported by non interest income, but asset quality weakened.

The board of directors of Bank of Baroda declared an interim dividend of Rs 11 per share. The stock surged 3.62 percent to Rs 642.90.

Capital goods majors Larsen and Toubro, and BHEL gained 2.7 percent and 2 percent, respectively.

Infosys closed at fresh record high of Rs 3,710.55, up 0.6 percent while its rival TCS climbed over a percent ahead of its third quarter earnings due on Thursday evening.

Commercial vehicle maker Tata Motors rose over a percent after its global Jaguar Land Rover wholesales increased to 40,244 units in December from 39,956 units in previous month.

Coal India gained 1.81 percent as the board of directors declared an interim dividend of Rs 29 per share on Tuesday.

However, Ranbaxy Labs plunged over 2 percent, continuing downtrend for the fourth consecutive session today. The stock plunged more than 12 percent from last Friday, especially after the company received form 483 with observations from US FDA on Toansa unit on January 11.

In the broader space, Reliance Power gained 2 percent as sources say Cabinet Committee on Investment has cleared company’s Tilaiya UMPP that received final environment and forest approvals.

Cabinet Committee on Economic Affairs continued its plan to reserve 30 percent product order of BSNL, MTNL for ITI. ITI shares rallied 7 percent.

Tilaknagar Industries rose 1.7 percent as the company decided to sell entire stake in arm PP Caps. The company wants to exit non-core operations via PP Caps share sale.

Unitech has decided to sell hotels and land for Rs 1,000 crore, reports CNBC-TV18 quoting sources. The stock climbed over 5 percent.

Bajaj Finance and Bajaj Finserv closed flat after their third quarter earnings.