Markets cheer RBI policy; Sensex jumps 217pts

Aggressive buying in IT, banking and select metal stocks led to a sharp late rally in the markets. Earlier in the day, the markets after a subdued start, exhibited choppy movement ahead and post RBI mid-term policy review.

The Reserve Bank of India (RBI) in its mid-term policy review today, kept the Cash Reserve Ratio and repo rates unchanged, and in a surprise move reduced the Statutory Liqudity Ratio (SLR) by 1%.

The cut in SLR seems to be a positive from the RBI policy.

While the IT stocks traded firm since the start of the day, the BSE IT index soared to a 10-year high, with Infosys and TCS striking record highs in trade today. Post policy, the bank stocks too witnessed fresh buying.

The metals and realty later on joined the bandwagaon. The Sensex had slipped almost 100-points at the day's low point of 19,554. However, the steep recovery thereafter saw the index soar to a high of 19,897 - up 343 points from the day's low in of just two hours or so.

The Sensex eventually ended with a gain of 217 points at 19,865. The NSE Nifty rallied 56 points to 5,949.

The open market auction will inject sufficient liquidity into the system and ease the cash cruch which the banks are facing. Indranil Pan, Chief Economist, Kotak Mahindra Bank said, "Given the current liquidity deficit of about Rs 1,00,000 - 1,10,000 crore, the liquidity  infusion of Rs 48,000 crore will definitely help."

In the world markets, Asian markets ended mostly lower on concerns stemming from Eurozone after Moody's said that they may downgrade Spain on debt re-financing concerns. Hong Kong's Hang Sang Index was off 1.3%,  athe Shanghai Composite index closed down 0.6%. Japan's Nikkei Stock Average was ended flat, South Korea's Seoul Composite fell 0.4% and Taiwan's main index rose 0.3%.

Hero Honda continued to swing between gains and losses ahead of the final annoucement of the structure of the joint venture (JV) after the Honda group decided to terminate the JV and sell 26 per cent stake in the 26-year-old venture to focus on wholly owned unit. The scrip closed its trade at Rs 1,691, up 4%  and was the top gainer on the Sensex.

ONGC stock was bolstered by stock split of 2:1, 1:1 bonus issue and Rs 32/dividend.The stock was last traded at a price of Rs 1,328 per share.

Among the BSE sectoral indices, IT index led the pack for the entire day. The index touched a 10 year high on the BSE. Two major scrips, TCS and Infosys were trading at an all time high of Rs 1,143 and Rs 3,296 respectively.

Banking index which was a laggard at the start of the trade gained after the RBI policy announcement and pulled the markets into the green zone.

The movers in this space were IDBI Bank and Canara Bank up 3% ecah followed by Kotak Mahindra Bank, SBI and ICICI Bank added 2% each. Meanwhile, at the close Capital Goods and Power indices ended in red, down 0.2% and 0.02% respectively.

The gainers on the Sensex were TCS up 3% followed by Infosys, Wipro,Tata Steel,SBI, ICICI Bank and Tata Motors added 2% each.

The losers were Mahindra & Mahindra and Tata Power down 3% each. Hindustan Unilever, Maruti Suzuki and Bajaj Auto which lost 1% each were the other noteable losers.

The market breadth was very positive. Of the total 3012 stocks traded on the BSE, 1534 stocks had advanced while 1314 had declined.