Sensex closes 247 points up, capital goods stocks gain

A benchmark index of Indian equities markets ended Wednesday's trade 247.72 points or 1.20 % up as the Reserve Bank of India (RBI) decided to keep the key policy rates unchanged.

The 30-scrip S&P Sensex of the Bombay Stock Exchange (BSE), which opened at 20,568.70 points, closed at 20,859.86 points - up 247.72 points or 1.20 % from its previous day's close at 20,612.14 points.

The benchmark touched a high of 20,917.57 intra-day and a low of 20,568.70 points.

The wider 50-scrip S&P CNX Nifty of the National Stock Exchange (NSE) also made healthy gains. It closed Wednesday's trade up 78.10 points or 1.27 % up at 6,217.15 points.

RBI Governor Raghuram Rajan was widely expected to go in for a third straight increase in the repurchase or repo rate after taking charge of the apex bank on Sep 4.

However, he has taken a wait-and watch approach over the current high levels of retail and wholesale inflation.

The repo rate is the rate banks pay when they borrow money from the central bank to meet their short term fund requirements. Reverse repo rate is the interest rate that the RBI pays to commercial banks when they keep their surplus short term funds with the central bank.

Dipen Shah, head, private client group research, Kotak Securities, told IANS that while a 25 basis points hike was on the cards to contain the inflationary pressure, the RBI's wait-and-watch policy will provide a short term breather to the markets.

"This will provide a short term breather for the markets which were expecting at least a 25 basis point hike in the key lending rates. RBI it seems is awaiting for more data and any movement in lending rates will depend on the year end scenario of retail and wholesale price inflation and factory output," Shah told IANS.

Other economic analysts have also welcomed the approach that has been adopted by the apex bank and termed it as appropriate for the given time.

"The policy of wait-and-watch taken by the RBI is appropriate at this point of time. The

RBI will take a holistic view of the inflation levels in the coming months which were very high due to food and vegetable prices. These prices are likely going to go down in the upcoming months,"senior economist at Dun & Bradstreet India Arun Singh told IANS.

"Elevated levels of interest rate would have not helped in controlling the inflation levels which were affected by high food and vegetable prices."

In Wednesday's trade healthy buying was observed in capital goods, automobile, oil and gas, bank and healthcare sectors.

The S&P BSE capital goods index was up 259.47 points followed by automobile index which gained 206.47 points, oil and gas index which gained 180 points, bank index was 178.87 points and healthcare index which edged higher by 111.52 points.

Major Sensex gainers were: BHEL, up 5.70 % at Rs.163.25; Tata Power, up 4.04 % at Rs.91.40; Bajaj Auto, 3.87 % at Rs.1,939; Hero MotoCorp, up 3.14 % at Rs.2,119.90 and Larsen and Toubro (L&T), up 2.83 % at Rs.1,093.50.

The main losers were: Jindal Steel, down 1.55 % at Rs.248.45; Sesa Sterlite, down 0.74 % at Rs.201.35 and ICICI Bank, down 0.13 % at Rs.1,096.80.

Among the Asian markets, Japan's Nikkei closed 2.02 % up and China's Shanghai Composite Index was lower by 0.13 % while Hong Kong's Hang Seng was up 0.32 %.

In Europe, London's FTSE 100 was trading 0.33 % up, Germany's DAX Index was higher by 0.95 % and the French CAC 40 Index lost by 0.71%.