The markets rose sharply on Tuesday closing in on their all-time highs, as they heaved a sigh of relief with the RBI policy review not springing up any negative surprise.
The Sensex rose 1.74%, or 358.73 points, to close at of 20,929.01, near its three-year high. The index needs just 76 points more to make new a closing high. The Nifty which gained 119.80 points, or 1.96%, to close at 6220.90, is just 91.55 points short of a new closing high.
Experts said with RBI policy coming in line with expectations the markets have very little to worry about it right now.
While the MSF and repo rate moves were expected, the positive surprise came in the form of additional liquidity provision through term repos that are likely to bring short-term rates further down.
This was enough to propel banking stocks such as ICICI Bank and Axis Bank, which rose 6.26% and 5.16%, respectively. PSU banks like PNB, Bank of Baroda and SBI, too, rose 4-5% each.
The 10-year government bond yield fell 10 bps to 8.56%, while the rupee, too, gained marginally by 0.33% to end at 61.32 against the dollar.
The foreign institutional investors continued their strong buying streak for the 18th consecutive session as they net-bought shares worth Rs 1,103 crore on Tuesday, taking their overall inflows to Rs 15,094 crore so far this month.
The market breadth was largely positive with all the sectoral indices on the National Stock Exchange closing the day in green and 47 out of 50 stocks in Nifty, too, ending in green.
The interest rate sensitive sectors like Bank Nifty (up 4.35%), CNX realty (up 2.71%) and auto (2.36%) indices were the biggest gainers.
Vikas Khemani, president and co-head wholesale capital markets at Edelweiss Capital, said there is strong undercurrent in equity markets right now with US quantitative easing unlikely to see tapering in the near term.
“The RBI policy was on expected lines and the quarterly earnings so far have also been good.
Markets are likely to continue their momentum for some more time with election outcome being the next trigger,” he said.