Sensex closes 195 pts up on rate cut hopes; SBI, ONGC up 2%

The BSE benchmark rose 194.79 points or 1.17%, to close at 16,862.80, supported by 25 components. Meanwhile, the NSE benchmark ended above the 5,100 for the first time since May 7, 2012 that moved up 61.80 points or 1.22% to 5,115.90.

After looking at just 0.1% growth in industrial output for April, market experts and bankers expect 50 basis points cut in repo rate or 50-100 basis points cut in cash reserve ratio by RBI in its mid-quarter policy review on June 18.

Even the pressure has been mounted on the RBI for further rate cut after the warning of investment downgrade by rating agency Standard & Poor's and sluggish growth in GDP for fourth quarter of FY12 .

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In the previous policy meet on April 17, the central bank had cut repo rate by 50 basis points to 8% and said there would less room for more cuts going forward. However, this time experts feel the RBI has to take some action to revive slowing economic growth.

Nilesh Shah, MD & CEO, Envision Capital said that the market is poised to rally only if the RBI surprises the street with a 50 basis points (bps) cut as a reduction of 25 bps is already factored in the market. He believes that the upside, however, is capped at 5200-5250 but beyond that only solid earnings could push it higher.

Country's largest lender State Bank of India jumped 2% while its rivals ICICI Bank and HDFC Bank were up 1.6% and 1.85%, respectively.

SBI chairman Pratip Chaudhuri expects the RBI to cut CRR by 100 basis points by June 18 that will release Rs 60,000 crore of liquidity into banking system.

Auto stocks too participated in the rally on rate cut hopes after lowest growth in car sales for May in the last eight months due to high interest rates and petrol prices. Shares of Tata Motors and Maruti Suzuki rallied 3% each while M&M gained 2%. Two-wheeler majors Hero Motocorp and Bajaj Auto were up 0.7% each.

Country's largest engineering and construction company by sales Larsen & Toubro surged 2.5% while state-owned capital goods company BHEL was up 1.4%.

Cigarette major ITC climbed 1.5% and state-owned oil & gas producer ONGC moved up 2%.

India's largest software services exporters TCS and Infosys rose 1% each. Top telecom operator Bharti Airtel too was up 1%.

However, shares of Dr Reddy's Labs and Wipro fell over 1.7%. FMCG major HUL slipped 0.5%.

In the second line shares, aviation, infrastructure, real estate and banks were on buyers' radar.

UCO Bank, Allahabad Bank, Kingfisher Airlines, IVRCL, Jet Airways, GMR Infrastructure, Lanco Infratech, HDIL, Hotel Leela, Pantaloon Retail and SKS Microfinance shot up 3-9%. However, Suzlon Energy tanked 2.5% on downgrade by foreign brokerages.