Sensex soars 500 points as rate cut, GST hopes brings back bulls

The Sensex closed above 28,000 and Nifty settled above 8,500, with the rate-sensitive banking and auto sectors leading the surge.

The benchmark indices had a spectacular session of trade, with the Sensex reclaiming the 28,000 mark and Nifty settling above 8,500, on expectations of a rate cut by the Reserve Bank of India, a glimmer of hope on the GST front and return of stability in the Chinese currency markets.

The bull surge was led by index heavyweights such as ICICI Bank, HDFC, SBI and RIL.

The Sensex ended at 28,067, stronger by 517 points or 1.8% and the Nifty settled at 8,519, up 162 points.

The broader markets were also in top gear, with the BSE midcap index surging by 2.1% at 11,431 and the smallcap index gaining 1.4% at 11,735.

The market breadth was over-whelmingly in favour of the bulls; out of 2,943 stocks traded on the BSE, there were 1,791 advancing stocks as against 1,055 declines.

The wholesale prices fell at a faster-than-expected annual rate of 4.05% in July, its ninth consecutive decline and lowest in atleast a decade, mainly driven by weak food and fuel prices.

The plunging inflation has resurrected hopes of a rate-cut by the central bank at On the GST front, the government is reportedly mulling a two-day Parliament session to get GST Bill passed in its determination to stick to the implementation timeline of April 2016 after a belligerent Congress-led opposition stalled passage of the indirect tax legislation in the just-concluded session.

Meanwhile China's central bank raised the value of yuan against the US dollar by 0.05%, halting a 3-day decline in the currency.

"The encouraging July CPI inflation print not only reflected the favorable base effect but more importantly, weakening sequential momentum. High frequency data hints at further downside to inflation in August. We expect CPI inflation to undershoot RBI’s January CPI target considerably, implying scope for further 25-50 bps rate cut in FY2016.

We believe chances of a 25 bps rate cut on September 29 have increased significantly, with global volatility being the only potential risk," points out a note from Kotak Institutional Equities.

Rupee

The rupee bounced back from the 65.34 mark, its weakest level since September 2013, after China strengthened yuan against the dollar.

The rupee is currently trading at 65, up 3 paise. SECTORS AND STOCKS All the BSE sectoral indices ended in the green.

The rate-sensitive banking and auto indices were the leading sectoral gainers on the BSE, racing ahead by 3% and 2% respectively on rate-cut expectations. Vedanta, ICICI Bank, HDFC, SBI and RIL were the top individual gainers on the BSE.

In the banking space, PNB soared by more than 8%, while ICICI Bank, HDFC, HDFC Bank, SBI and Kotak Mahindra Bank added 2-4% each.

The auto space saw the likes of Bajaj Auto, M&M, Hero Motocorp and Maruti Suzuki gaining 2-3% each.

The metal stocks were also in the limelight, with Hindalco and Vedanta gaining around 3% each.

Telecom majors, including Bharti Airtel, Idea Cellular and Rcom surged by 2-3% each after the government permitted spectrum sharing in a move that could resolve the issue of call drops and improve efficiency in their respective telecom circles.

Glenmark Pharmaceuticals surged by 7% to Rs 1,131 on inclusion in the MSCI Emerging Markets Index from close of August 31, 2015.

Adani Port and Special Economic Zone has gained 8.7%, adding to Thursday’s 3.9% rise as the stock is set to replace NMDC in Nifty from 28 September.

Infosys and Dr Reddy's shed around 1% each to be the sole losers among the Sensex-30 scrips.