Markets end higher on rate cut hopes

Markets ended 2% higher on Friday, amid firm global cues, led by financials after headline inflation in May which remained within RBI's comfort zone for the second straight month and stabilising rupee sparked hopes of a further policy rate cut by the central bank at its policy meet on Monday.

The 30-share Sensex ended at 19,178 up 351 points or 1.86% and the 50-share Nifty ended at 5,808 up by 109 points or 1.92%.

The Sensex and the Nifty reached an intra-day high of 19,213 levels and 5,819 mark, respectively.

India's wholesale price index WPI-based inflation fell further to 4.70% in May from 4.89% in April.

This is the second month in a row that inflation remained in RBI's comfort zone of 4-5%.

On the global front, Japan's Nikkei average climbed 1.9% on Friday, rebounding from a slump in the previous session, as robust data eased concerns over whether the U.S. economy can withstand a pullback in stimulus by the Federal Reserve.

The Nikkei ended up 241.14 points at 12,686.52 after trading as high as 12,900.65, though it was still holding below the Ichimoku cloud in a bearish sign. For the week, it was down 1.5%, marking its fourth straight weekly loss, its longest such losing streak since October.

Hong Kong shares rose on Friday as investors piled into high yielding counters that had been battered in recent days, but still ended the week lower for a fifth consecutive time.

Back home, satisfied over easing of inflation, Plan panel Deputy Chairman Montek Singh Ahluwalia today said the Reserve Bank should take into account improvement in price situation while deciding on interest rate cut in its mid-quarter policy review due on Monday to boost growth.

The rupee extended gains after headline inflation eases further, holding out some hopes for a rate cut, say dealers. The Indian unit is at 57.64/65, off 57.93 lows, versus 57.98/99 Thursday close. On the sectoral front, BSE Consumer Durable index surged by nearly 4% followed by counters like Auto, Realty and Metal, all gaining by nearly 3%. Infact, all the major BSE sectoral indices ended in green zone.

Shares of rate sensitive sectors such as realty, infrastructure, banking and automobiles ended higher ahead of the Reserve Bank of India (RBI) mid-quarter policy review on June 17.

Indiabulls Real Estate, Oberoi Realty and Sobha Developers from realty, Yes Bank, Punjab National Bank and ICICI Bank from banking and Tata Motors, Maruti Suzuki India, Bajaj Auto and Mahindra and Mahindra from automobiles ended higher by over 3% each on the Bombay Stock Exchange (BSE).

RBI is likely to go for 0.25% cut in cash reserve ratio (CRR) instead of interest rates next week as this move is likely to balance growth and rupee concerns,” Bank of America Merrill Lynch says in a note.

Hindalco Industries was the top Sensex gainer, up over 8%, extending its previous day’s over 5% rally, on hopes of the recent weakness in the Indian rupee will benefit the stocks.

Tata Motors moved higher by nearly 5% after its UK-based subsidiary Jaguar Land Rover Limited (JLR) recorded a strong growth in retail sales in May 2013.

Index heavyweight RIL gained by over 3%. While depreciating rupee has become a concern for companies importing goods and service from abroad and spending in the US currency, it seems to have brought good news for oil refining and producing companies Reliance Industries and producer Cairn India.

"Every rupee 1 change in the INR/USD rate assumption impacts RIL’s EPS by about 3%," said Rohit Ahuja, analyst with domestic brokerage ICICI Securities in a report released today.

Infosys moved higher by nearly 1% after the company said its US subsidiary Infosys Public Services has won a contract from CareFirst BlueCross BlueShield.

Other notable gainers were Marut Suzuki, Tata Power, L&T, Bajaj Auto, ICICI Bank, Tata Steel, HDFC and M&M.

Among other shares, Apollo Tyres dipped 6% to Rs 64.75, its lowest level since January 2012, extending its previous day’s over 20% fall on the Bombay Stock Exchange on worries over debt burden post the buyout of US-based Cooper Tire & Rubber.

Tata Coffee surged nearly 6% after slumping over 25% in the previous two trading sessions on the Bombay Stock Exchange (BSE).

MMTC was locked in lower circuit of 10% for the second straight day, currently trading at Rs 171, its lowest value since August 2007 on BSE, after the government has fixed the floor price for stake sale at a huge discount.

Jet Airways (India) has rallied over 8%, extending its previous day’s 6.4% surge, ahead of Foreign Investment Promotion Board meet today that will decide on Jet Airways' stake sale to Gulf carrier Etihad Airways.

The market breadth in BSE ended firm with 1,418 shares advancing and 890 shares declining.