Mumbai, Aug. 5: Stocks soared, the rupee spiked and gold lost some of its lustre after world crude oil prices fell to a three-month low, tumbling below $120 a barrel.

Crude oil prices slumped to around $118 a barrel on rising supply from Opec and lower demand in developed countries.

Surging prices in commodity have been blamed as one of the factors responsible for rising inflation in India, prompting the Reserve Bank of India (RBI) to raise interest rates last week.

The fall in crude oil prices brought some life into the equity markets which were trading in a narrow range. Reflecting the sudden turnaround in investor sentiment post noon, the BSE sensex, which had dipped to a low of 14529.21 after opening the day at 14562.68, hit an intra-day high of 14986.63 and finally settled at 14961.07, a gain of 383.20 points, or 2.63 per cent, over the previous close.

Rate-sensitive stocks such as banking, realty and auto, which had been under pressure since the RBI’s action on July 29, led the rally while metal shares attracted profit booking because of weak London Metal Exchange advices.

While ICICI Bank jumped over 8 per cent to Rs 693.30, HDFC Bank was up nearly 7 per cent at Rs 1,184.35. In the realty counter, DLF spurted 7.7 per cent to Rs 553.15, while Unitech climbed by a similar margin to Rs 181.80.

A section of the market, however, believes that despite today’s surge, the stock markets are likely to remain under pressure over the short term because of a variety of factors that include the lack of buying interest by foreign institutional investors and slowdown in India’s economic growth, which could impact company earnings.

It is also feared that given the demand-supply imbalance in oil, it can start inching up again after consolidating at the current levels.

A rising stock market had its impact on the forex markets with the rupee appreciating 25 paise against the US greenback to settle at Rs 42.25 against the dollar.

Crude oil also affected the prices of the yellow metal. In New York, spot gold ended below the $900-mark at $896.95 an ounce, down from $911.40 per barrel last Friday.

In Mumbai, standard gold (99.5 purity) ended lower by Rs 335 per ten gram to a one-and-a-half month low at Rs 12,135 from yesterday’s close of Rs 12,470.

Similarly, pure gold (99.9 purity) finished weak at Rs 12,200 from the overnight close of Rs 12,535.

Silver ready (.999 fineness) dropped Rs 740 per kilo to Rs 24,100 from the previous close of Rs 24,840.

Oil trend

The fall in the price of crude oil extends a slide from the July 11 record high of $147.27 a barrel, despite a Gulf of Mexico storm that has curbed oil output and is prompting some to say that oil’s rally has run its course for now.

“Most of the hedge funds have been taking profits,” said Angus McPhail of British-based investment firm Alliance Trust.

Asked how far prices could fall, he said, “Probably to about $100 within the next month if you keep on getting weak demand data.”

US crude was down $1.89 at $119.52 a barrel by 1310 GMT and fell as far as $118, the lowest price since May 5. London Brent crude lost $2.10 to $118.58.