Mumbai, Sept. 19: The sensex roared past its second milestone this year — the 16000-mark — after the US Federal Reserve slashed its key interest rate by an unexpected 50 basis points.
It not only sparked the single biggest gain for the bellwether index but also stuffed another Rs 1,53,002 crore into investors’ wallets — the wealth gain sparked by expectations that rate cuts would prompt overseas investors to channel more funds into emerging markets such as India.
The index crossed the previous milestone of 15000 on July 6 — just 53 trading sessions ago.
Encouraged by a strong overnight rally in the Dow Jones Industrials and a equally good show in many of the neighbouring indices, the stage was set for a grand show. But what followed, surprised even the die-hard optimists.
The 30-share BSE sensex opened at 15940.79 — a sharp 270 points above the previous close of 15669.12. The gains swelled on a day of brisk buying across a wide range of sectors — from banks, automobiles, oil and gas, realty, and metals to sugar.
The benchmark index not only broke through the 16000-mark but stayed well above that level. It hit an intra-day high of 16335.30 and later ended at 16322.75, a gain of whopping 653.63 points or 4.17 per cent. The index has, therefore, surpassed its previous peak of 15868.85 clocked on July 24 by a huge margin.
“The 50 basis points cut by the Federal Reserve came as a shot in the arm for global equities. We expect the Indian equities to continue to do well on the back of India-centric factors such as domestic consumption, favourable demographic profile and higher disposable incomes in the hands of consumers,” said Dinesh Thakkar, chairman of Angel Broking.
While all sectoral indices finished on the higher side, realty stocks were a major highlight of the day. Brokers said this was due to an optimism that an interest rate cut in the US could lead to similar reductions here, thereby positively impacting the sector.
The BSE realty index was the largest percentage gainer, led by stocks such as DLF. The index rose 5.77 per cent. Closely following it was the oil and gas index which rose 5 per cent. Bank shares also rose on hopes of lower interest rates here while metals gained because of a rally in commodity prices.
Heavyweights such as Reliance Industries and ICICI Bank made significant contributions to the gain. RIL rose nearly 6 per cent to a record close of Rs 2,172.90
Some experts, however, advised caution. An analyst here said political uncertainties could play the spoilsport even as one must not forget the impact of rising crude oil prices.
Ambareesh Baliga of Karvy Stock Broking said the Fed action indicated that it was taking steps to avoid a slowdown. “It shows they are worried about a foreseeable recession. Therefore, one must not be euphoric about this rally and it is time for people to book some profits,” he told The Telegraph.