Snapping a two-day losing streak, the Bombay Stock Exchange benchmark Sensex closed 200 points higher today on heavy buying in energy giants RIL and ONGC in the wake of last week's increase in fuel prices.

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In sharp contrast to other major Asian peers, the 30-share index opened in positive territory and remained in the green for the entire session.

The barometer ended at 17,774.26, higher by 199.73 points, or 1.14%.

The wide-based 50-share Nifty index of the National Stock Exchange also ended 1.22% higher, at 5,333.50 points.

Analysts said the market rallied strongly on sustained buying and closed near the day's high. A good opening on the European exchanges provided a further boost to the market, with the Sensex touching a high of 17,794.80 in the final hour of trade.

Oil stocks continued their upward journey for the second day in a row on account of the recent revision in the policy regarding the pricing of auto fuel and other petroleum products.

ONGC zoomed 3.1%, Oil India 2.34%, HPCL 8% and BPCL 3.39%.

On the whole, oil and gas stocks surged as much as 14% in the trading session.

"Investor confidence is high as the government's decision to decontrol fuel prices will help to pare the fiscal deficit and boost the financial health of oil companies," CNI Research chairman and managing director Kishore P Ostwal said.

Last Friday, the government decontrolled the retail price of petrol, revised the prices of cooking fuels, and announced its intention to gradually decontrol diesel prices.

But some have voiced fears about the impact the fuel price hike will have on inflation and the consequent measures that the Reserve Bank of India will take to control it.

The country's most valued firm, Reliance Industries Limited, jumped 2.33% after the company said it has made a seventh oil discovery in a Gujarat block.

RIL carries the maximum weightage in the benchmark indices.

The Anil Ambani-led Reliance Communications (RCom) jumped 4.6% and was the biggest gainer in the Sensex components.

On Sunday, the company announced a Rs50,000 crore deal tomerge its telecom tower business with GTL Infrastructure.

Smart gains were witnessed in some other ADAG stocks, with Reliance Infra advancing 4.04%, RPower 3.19%, and RNRL 1.29%.

Auto manufacturer Tata Motors also moved up 2.35%. The company's board is meeting today to consider various options to raise long-term capital funds.

Another vehicle major, M&M, rose 1.22%. On Saturday, the company said it plans to infuse Rs250 crore into the aerospace business.

Tata Power rose 2.28 per cent, following its announcement that it will buy a 20.95MW wind energy asset in Maharashtra. The firm is also working to increase its wind-power capacity over the next two years, it said.

Hectic buying was witnessed across sectors, with the exception of FMCG stocks. ITC declined 1.52%, the most in the Sensex, HUL 0.08%, and Jindal Steel 0.82%.

The market sentiment also improved after concerns eased regarding harsh regulations on the banking sector and the agreement reached by leaders at the G20 summit to take theirown paths to ensure economic growth, brokers said.

At the G20 summit, prime minister Manmohan Singh warned of a risk of global double-dip recession if countries simultaneously cut government spending and suggested a phased approach to deal with it.

Banking stocks, which were battered in the last trading session over fears that an increase in auto and kitchen fuel prices would lead to high inflation, bounced back today.

ICICI Bank jumped 1.29%, HDFC 0.79%, HDFC Bank 0.20% and SBI 0.05%.

Other major gainers in the Sensex pack were Infosys, which rose 0.96%, L&T 1.64% and DLF 1.91%.