Investors react to the share price movement in Mumbai on Wednesday. (AFP)
Mumbai, July 9: Shares staged a sharp rally following a downturn in crude prices and on hopes that the exit of the Left would give way to more reforms.
The 30-share sensex of the Bombay Stock Exchange (BSE) rallied to a high of 13998.48 during intra-day trading before closing at 13964.26, a gain of 614.61 points, or 4.60 per cent, from its previous close.
Broking circles said a key factor for equities opening in the green was the positive cues coming from global bourses because of lower crude oil prices.
Crude fell around $5 per barrel on Tuesday. Rising crude oil prices impact various sectors and so its sharp decline led to buying across counters, an analyst said.
While the stocks of oil marketing companies surged, there was also brisk buying in realty and banking stocks on anticipation that interest rates are unlikely to be revised upwards.
The BSE realty index led the pack of gainers with a rise of 6 per cent, and the the BSE bankex rose 4.87 per cent on the back of heavyweights such as ICICI Bank.
Moreover, the withdrawal of the Left fuelled optimism about the Union government pushing reforms. Merrill Lynch in a note said the government would try to bring in reforms linked to more divestments and increasing the foreign direct investment in insurance apart from allowing foreign direct investment in retail.
Shares of Reliance Industries Ltd (RIL) also rebounded. The stock had been under pressure because of a possibility of the government imposing a tax on windfall profits on private sector oil companies. The RIL scrip closed sharply higher by 5 per cent at Rs 2,079.95.
Reliance Communications also saw brisk buying as the company announced that it was extending the 45-day exclusivity period with MTN for another two weeks. The share rose over 6 per cent to Rs 440.95, its highest close in a fortnight.
Even as many stocks continue to look attractive at current levels, market circles are of the opinion that much will depend on how crude oil behaves. In the immediate term, the upcoming inflation numbers could also hold the key, they added.
The rupee today gained 14 paise at 43.13 against the greenback on expectations of fresh capital inflows, after a strong surge in domestic stocks markets.
The interbank foreign exchange market, however, witnessed dull trade in a range of about eight paise during the day after the local currency resumed firm at 43.14 per dollar against its previous close of 43.27.