BSE Sensex zooms over 700 points, Nifty regains 7,200-mark

BSE Sensex zoomed up over 700 points on Tuesday and the Nifty reclaimed the 7,200-mark in afternoon trade as calls for a rate cut intensified, backed by experts too. 

 

At 1429 hours, the benchmark BSE Sensex was at 23,721.49, up 719.49 points or 3.13% higher from previous day's close.

 

HSBC and UBS in separate reports said that they expected RBI Governor Raghuram Rajan to cut rates in the next monetary policy meet after Finance Minister Arun Jaitley maintained the fiscal deficit target at 3.9% of GDP for the current financial year and at 3.5% of GDP for the next fiscal. This despite the fact that the government was under pressure to increase allocation to rural and infrastructure development at a time when growth in the economy has been easing.

 

"The Budget has given more preference to stability rather than growth and this should give more room to cut key policy rates. We now expect 50 bps of policy rate cut in the calendar year 2016 (from 25 bps) as the Budget should give RBI sufficient space," UBS said.

 

HSBC said it expected a rate cut of 25bps in the next policy review. The bank's report said that maintaining fiscal deficit target in the current scenario "was not easy for a government which was trying to protect growth as well as preserve macro stability." HSBC noted that "fiscal outcome makes us more confident on our long-standing call for a 25 bps post budget rate cut by the RBI"

 

In Tuesday's session, stocks of tobacco companies, led by ITC, rose by over 9% despite excise duty hikes, making the tobacco company the highest gainer out of the blue chip stocks on the BSE. Markets opened higher a day after the budget also tracking some strength in the Asian markets.