Feb. 14: The 30-share sensex was on steroids today and put on 817.49 points after a widely-anticipated increase in petrol and diesel prices sent shares of state-run oil retailers surging.

Stocks were also buoyed by reports of strong Asian markets and news of an unexpected rise in retail sales data in the US.

Before settling at 17766.63, the market touched an intraday high of 17838 propelled by huge buying from both domestic and foreign institutional investors, particularly in power stocks. The 50-share Nifty also surged about 293 points and closed on positive sentiments at 5202.

The government today raised retail prices of petrol and diesel to ease the burden on state-run oil retailers who had been yelping at the losses they had to shoulder at a time when world crude oil prices had soared.

Indian Oil ended up 13.8 per cent, Hindustan Petroleum rose 14.8 per cent and Bharat Petroleum gained 10.8 per cent.

Asian stocks powered higher after retail sales in the US jumped 0.3 per cent in January, reflecting an unexpected rebound in consumer activity despite mounting concerns about slower economic growth.

“Positive retail numbers from the US, strong Asian markets, and some short covering across the board have helped the market rise for the second day,” said Hitesh Agrawal, head of research at Angel Broking.

“But, retail investors might still wait for some more time to ensure that the market’s growth is sustainable,” he added.

Led by ADAG stocks Reliance Energy and Reliance Communications, which rose over 9 per cent each, power remained the star performer of the day with overall gains at over 8 per cent.

Realty and PSU stocks, which leapt about 7.6 per cent each, were the other major gainers .

Although the market is being supported by institutional buying at present, market analysts believe that the current levels may not be sustained for long unless trading volumes improve, which will be visible only when retail participation increases.

“Retail investors, who bought shares at lower levels in the past few sessions, will definitely opt for profit booking whenever the market scales new highs. This could pose a threat to investors’ sentiments at current levels. Since the liquidity is good at present and as investors are not locking up their money in IPOs, we hope they will buy stocks even at higher levels to end the market’s volatility,” a leading analyst said.

“In the short term, markets are focused on global flows which themselves are unpredictable,” said Rajiv Anand of Standard Chartered Mutual Fund.

“Actually, there was a high level of pessimism in the markets over the looming recession in America. So, yesterday’s US sales data, which suggested a marginal improvement, acted as a huge catalyst to lift market sentiments everywhere,” he added.

Mixed response

India Inc today said the government’s decision to hike petrol and diesel prices would help oil companies cut losses but would add to inflationary pressure.

“Given the high level of international crude prices, some adjustment in domestic retail prices had become inevitable,” Ficci said.

It said the hike in petroleum and diesel prices would, however, add to inflationary pressures.

The Confederation of Indian Industry (CII) said a price hike was inevitable since “the burden of insulation for the government is becoming unsustainable”.

India imports 70 per cent of its oil requirement from overseas.

“Proactive conservation measures should be adopted so that the country could look at a tangible target of reducing oil consumption. The government must set a target of curtailing domestic consumption by 10 per cent by 2010,” the CII said.

Terming the move as a “sensible decision”, Assocham president Venugopal Dhoot said it would help reduce under-recoveries of oil marketing companies.

However, V. Ramachandran, director (sales) of LG Electronics, thinks an increase in fuel prices will result in higher logistics and energy costs, which will make consumer durables more expensive.