In what could mark as the biggest single day gain in last 5 years, the key benchmark index BSE Sensex soared 728.73 points after the Reserve Bank of India surprised with 0.25 per cent interest rate cut to boost growth in the economy. The stock market witnessed buying from across all sectors, with NSE Nifty gaining 216.60 points closing the session at 8,494.15 with investor’s wealth reclaimed the Rs100-lakh crore mark.
The BSE Sensex also crossed the psychological mark of 28,000, ending the day’s trade at 28,075.55, while the broader NSE index gained 3 percent or 250 points to reclaim its crucial level of 8,500. Previously, Sensex made its single largest gain by 2,110.79 points on May 18, 2009.
This rate cut comes as a very strong trigger for the market considering the fact that this was the first repo rate cut since May 2013 and ahead of the scheduled date of monetary policy announcement on February 3. According to market experts, the rate cut would strengthen the positive momentum in the economy and help kick start the investment cycle which would further stoke earnings at Indian companies.
After the rate cut announcement, Bank Nifty the banking share index touched a record high of 19,410. HDFC, ICICI Bank, ITC, RIl, SBI, HDFC Bank and l&T led the 28 gainers in the 30-share BSE Sensex. The Banking index closed 3.2 percent higher, the Realty index was up 8 percent, Auto index was up 2.1 percent and Capital Goods index finally ended 2.4 per cent higher.
Most Asian stocks ended higher after India cut rates. Key benchmark indices of China, Hongkong, Japan, Singapore and South Korea rose by 0.03 per cent to 3.54 per cent while Taiwan’s weighted average eased by 0.16 per cent.
“Indian economy is going through a dream run. The mood was visible at the Vibrant Gujarat summit where Prime Minister’s confidence was assuring. I believe the bull run is going to continue for a while with intervals of correction,” Nirmal Jain, Chairman and Founder, IIFl said.
“The RBI rate cut is a turning point for the markets and it is going to be a mood booster. Foreign funds can increase their asset allocation for India considering the positive developments,” Jain added. The rupee also touched two-month high of 61.47 against the US dollar in day trade before closing up by 12 paise at 62.06 on Thursday amid a rally in stock markets as RBI cut policy rate by 0.25 percentage points.