Following the move of Reserve Bank of India (RBI) to ease capital regulations after the Budget announcement, the market remained aggressive for the second straight day as the benchmark Sensex vaulted 464 points to nearly a one-month high. Apart from other soaring stocks due to buying spree of investors, banking shares led the pack to help rise the BSE index.
In fact, the RBI has allowed lenders to expand their base under the upcoming Basel III norms to help shore up capital ratios. Besides, there were some reassuring words from Finance Minister Arun Jaitley, who also pledged all possible support to keep banks in good health.
The 30-share Sensex closed the session higher by 463.63 points or 1.95 per cent at 24,242.98 -- its highest closing since February 8. The gauge had posted its biggest single-day gain of 777.35 points in almost 7 years in the Tuesday trade. It has gone up by over 1,240 points, posting its best two-day gains in almost seven years. Asian markets also ruled in the green after a raft of solid economic data in the US which pushed up buying activity further.
Market participants, however, welcomed the RBI’s move to see banks in good shape. “Easing of rules by the Central Bank will allow lenders to bolster capital ratio by including reserves associated with property revaluations and foreign currency translations in the calculation of common equity tier I capital. Banking stocks were as a result on a high on Wednesday,” said Shreyash Devalkar, Fund Manager Equities, BNP Paribas MF.
Shares of State-run banks soared by up to 12.5 per cent on Wednesday after Reserve Bank announced amendments to recognise more balance sheet items as common equity tier-I capital which will help unlock up to Rs35,000 crore for these lenders impacted by asset quality troubles. Stocks of state-owned banks such as State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BoB) were at the centre of buying activity.
Among the 30 Sensex components, SBI was the star performer surging the most, up by 11.50 per cent to Rs180.85, followed by ICICI Bank 7.36 per cent to Rs220.20.
Also, gains in Adani Ports, Hero MotoCorp, BHEl, Tata Steel, Axis Bank, NTPC, HDFC and Maruti Suzuki drove the upside. As many as 23 stocks gained while 7 lost.
The NSE Nifty 50 index also settled at 7,368.85, up 146.55 points, or 2.03 per cent. “The big positive was the Government’s commitment to its fiscal deficit target, raising expectations of a policy rate cut by RBI any time this month,” traders said, adding that Jaitley maintained the fiscal deficit target for 2016-17 at 3.5 per cent of GDP.
The rupee was another sentiment booster as it gained 31 paise to end at a 7-week high of 67.54 per dollar. “The post-Budget rally extended for yet another day, with banks leading the pack after RBI eased capital regulations to meet Basel III norms. It also helped that FIIs were seen as buyers yesterday, putting a pause to their continuous sell off from Indian equities,” said Anand James, Co-Head Technical Research Desk, Geojit BNP Paribas Financial Services.
Among sectors, the BSE realty index jumped most by rising 5.05 per cent, followed by banking (4.92 per cent), infrastructure (2.84 per cent), PSU (2.57 per cent), IT (2.49 per cent) and power (2.13 per cent). The broader markets too continued to trend firm as retail investors boosted their bets, with the BSE small-cap index rising 2.21 per cent and mid-cap 1.88 per cent. Asian shares, including those of Hong Kong, Japan, Singapore and Shanghai, remained in the positive territory while Europe ruled high on speculation that the global economic recovery will gain traction.