Sep 05, 2013, 05.28 PM IST | Source: Moneycontrol.com

Rajan fuels rally; Sensex surges 412 pts, Bankex up 9%

Experts are not convinced with today’s rally as they feel that it is too early to say India has turned a corner. They advised investors to use every rally for profit booking because the real problems like current account deficit are not in control yet.

16:52

Dalal Street cheered Raghuram Rajan's 'big initial package' as the Sensex surged more than 400 points supported largely by banks. The market recouped all its Tuesday's losses in following two sessions on Syria tensions easing and on hopes of recovery in economy after RBI governor's aggressive stance.

The Sensex gained 412.21 points or 2.22 percent to close at 18979.76, and the Nifty was up 144.85 points or 2.66 percent at 5592.95 after hitting an intraday high 19117.52 and 5625.75, respectively.

The governor who took over Subbarao, on its first day (September 04), announced several measures to curb the rupee depreciation, modernise the Indian banking system and improve economic growth.

Also read: Raghuram hits first-ball sixer; looks set to bowl mkts over

However, experts are not convinced with today's rally as they feel it is too early to say India has turned a corner. They advise investors to use every rally for profit booking because the real problems like current account deficit are not in control yet.

This rally is shortlived, believes Sangeeta Purushottam, founder and managing partner, Cogito Advisors.

Purushottam explains that the market will find it tough to move up "beyond 5700-5800 levels, because valuations are no longer compelling."  She said the reform measures taken by the RBI and the government will take time to fructify. "One cannot define this market in a secular uptrend, there will be rallies and there will be corrective phases, so it is more like a base building phase that I see over the next year-and-half," she elaborated.

Meanwhile, Sanjeev Prasad, Senior Executive Director and Co-Head, Kotak Institutional Equities sees QE tapering and elections as two major uncertainties for Indian market as of now.

In the money market, the rupee gained around 150 paise intraday on positive sentiment after governor Rajan announced steps to attract NRI dollars as well help banks raise overseas capital.

Bank of America Merrill Lynch, in its report, welcomed Rajan's proposal to offer a swap at a concessional 3.5 percent to banks for FCNRB deposits of 3+ years on his very first day.

“This should add about USD 10 billion to forex reserves and rein in rupee expectations around current levels. This brings to fruition our standing call that the RBI would need to mobilise forex reserves by launching a NRI deposit scheme in which the rupee risk is borne by it (or the government),” BoAML report said.

The domestic currency closed at 66.01 per dollar, up 106 paise from previous close.

Big surge was seen in banking stocks today as the BSE Bankex rallied more than 9 percent after RBI announced measures which will ease liquidity.

RBI has raised overseas borrowing limit of banks from 50 to 100 percent of their tier 1 capital and swap it with RBI 1 percent below markets rates. It has also allowed banks to swap their FCNR deposits with the RBI at 2 percentage points below market rate.

The rally in Axis Bank was also because of Reserve Bank of India (RBI) withdrew curbs on foreign equity investment in the bank.

Among others, ITC, HDFC, Larsen & Toubro, ONGC, Coal India and BHEL jumped 4-8 percent whereas Sesa Goa shares lost over 4 percent.

Technology stocks remained under pressure throughout the session with the IT Index falling 3 percent on rupee appreciation. Top software services exporters TCS and Infosys were down more than 3 percent.

15:05
Superstar of the day remain to be banking stocks with SBI gaining 10 percent, ICICI Bank pocketing 9 percent and HDFC twins making handsome gains.

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14:36
The market-friendly stance of new RBI governor Raghuram Rajan is pleasing and the market has reacted positively to measures announced by him, but it is early to say India has turned a corner, says Sanjeev Prasad, Senior Executive Director & Co-Head, Kotak Institutional Equities.

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13:07
The Sensex is up 386.83 points or 2.08 percent at 18954.38, and the Nifty is still below the 5400-level at 5582, up 134.40 points. About 1298 shares have advanced, 711 shares declined, and 144 shares are unchanged.

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12:25
Bank of America is positive on Reserve Bank's (RBI) measures and feels that it will shore up reserves and confidence among banks.

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11:05
After a massive opening, it is a blockbuster rally on the Dalal Street as BSE Sensex is up 382.99 points or 2.06 percent at 18950.54. However, the Nifty is fallen below 5600, at 5575.70, up 127.60 points or 2.34 percent. About 1094 shares have advanced, 448 shares declined, and 100 shares are unchanged.

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10:18
The mood is positive on both Dalal Street and Mint Street as several measures announced by new RBI governor Raghuram Rajan pushed equity benchmarks more than 2 percent higher.

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09:15
RBI governor Raghuram Rajan announced a slew of reforms measures, from freeing up bank branches, to improved debt recovery systems, to stricter controls on debt restructuring.

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