A day after suffering losses following the presentation of the Union Budget, the benchmark Sensex bounced back by over 777.35 points to post biggest single-day gain in nearly 7 years. On Tuesday, it closed at 23,779.35 which was bolstered by renewed hopes of a rate cut by the Reserve Bank amid positive Asian cues.
With the Budget out of the way, the focus now shifts to RBI Governor Raghuram Rajan’s monetary policy action to revive investment and growth.
Marking its biggest post-Budget day rally ever, market soared 777 points, its best single-day show in nearly 7 years, after fiscal measures in the Budget offered more elbowroom to RBI to ease policy.
Finance Minister Arun Jaitley in his Budget speech yesterday made it clear that the government will go for fiscal prudence and keep deficit at 3.5 per cent for 2016-17.
This has added to the clamour that the Reserve Bank may go for a rate reduction as early as this month to revive private investment and spur growth.
Global cues remained positive as major markets in Asia and Europe ruled firm after China announced monetary easing in an attempt to bring back its economy back on track while oil prices showed a firming trend.
The BSE Sensex closed at 23,779.35, a jump of 777.35 points, or 3.38 per cent.
Today’s gain is the biggest single-day rise since May 18, 2009 when the 30-share barometer had jumped 2,110.79 points.
It had lost 152.30 points in yesterday’s highly volatile session.
At the close, the NSE Nifty was up 235.25 points, or 3.37 per cent, at 7,222.30.
“The well-balanced Budget has erased market concerns over questions of fiscal discipline and long-term capital gains. The fiscal plan has raised optimism among investors as they look forward to a possible rate cut by RBI,” said Vinod Nair, Head-Fundamental Research, Geojit BNP Paribas.
The rupee, at 67.85, was on a higher ground against the dollar, which was lapped up by market participants.
According to a private survey, manufacturing activity expanded for the second consecutive month, which served as a feel-good factor.
Value-buying in several battered stocks and covering-up of short positions provided further momentum, brokers said.
UBS, the global financial services major, in a research note, said RBI is likely to go for a 50 basis point rate cut this calender year as the Budget gives the central bank sufficient room to adopt a more accommodative stance.
Prominent gainers among the 30 Sensex stocks include ITC Ltd, ICICI Bank, Maruti Suzuki, Hero MotoCorp, Adani Ports, GAIL and Tata Motors.
Among Sensex components, 27 stocks gained, while ONGC, Hindustan Unilever and Dr Reddy’s declined.
The BSE FMCG index gained the most by surging 4.90 per cent, followed by consumer durables 4.37 per cent, realty 4.21 per cent and auto 4.19 per cent.
In line with the overall trend, the small-cap index climbed 3.23 per cent and the mid-cap 3.04 per cent.
The US dollar ended cheaper against the rupee at 67.85/86 per dollar but the pound sterling finished higher at Rs 94.89/91 per pound at the close of the Interbank Foreign Exchange market today.