Mumbai: The Nifty closed at more than 2-month high on heavy volumes, rising 1.5% in reaction to the 50 basis points cut in cash reserve ratio (funds that banks have to keep with RBI) by the Reserve Bank of India.
Index heavyweights L&T, SBI, ICICI Bank and Reliance Industries were the main drivers on Tuesday. The Sensex rose 244.04 points, to close at 16,995.77 - a tad below the 17,000 mark. The Nifty moved up 81.10 points to 5,127.35 - at its highest level since November 14, 2011.
However, experts feel the market may see correction at any time as it had rallied 10 per cent since the start of 2012.
Ambareesh Baliga, COO of Way2Wealth says, the rally may not last too long. 'I think we are more or less close to the top and the correction may set in anytime,' he adds. Although Baliga is cautious on the market now, he says it will only be a correction and the market will not re-enter the bear phase.
It was a solid boost to the market today, giving confidence to the investors. RBI's move signals that it has shifted its focus from inflation to reviving growth. It has injected Rs 32,000 crore liquidity into the banking system by cutting CRR while kept policy rates unchanged.
Naresh Takkar, MD & CEO of ICRA says, "The preference for a CRR cut as opposed to further open market operations seems to be aimed at improving the confidence levels of industry and market players given the moderation of economic growth."
"Although the RBI indicated a shift in the monetary stance towards growth concerns, it kept the policy rate unchanged, which was in line with our expectations, citing upside risks to its projection that headline inflation would moderate to 7% by March 2012," he further added.
The BSE Bank and Capital Goods indices were star performers, rising 3 per cent each.
Index heavyweights L&T and SBI shot up 5.6 per cent & 5.2 per cent, respectively. ICICI Bank was up 3.3 per cent, and Reliance Industries gained 1.6 per cent as its buyback offer will open during February 1, 2012 - January 19, 2013.
In the metal space, Hindalco surged 4.5 per cent; Sterlite Industries, Tata Steel and Jindal Steel were up 1-3 per cent while Coal India lost 1.35 per cent on pricing issues.
Among auto stocks, M&M rallied 3.56 per cent. Tata Motors and Hero Motocorp moved up 1-1.4 per cent while Maruti fell 0.4 per cent.
Infosys, HDFC Bank, ITC, HDFC, TCS and Bharti Airtel among other largecaps were up 0.5-1 per cent. However, Sun Pharma, HUL, NTPC and GAIL declined 0.5-1.3 per cent.
Volume improved quite sharply - total traded turnover was more than Rs 2.27 lakh crore.
The broader markets too gained - the BSE Midcap Index was up 1.4 per cent and Smallcap up 0.7 per cent. Advancing shares outnumbered declining by 1599 to 1208 on the BSE.
On the global front, European markets were trading 0.7-1 per cent lower. The Dow Jones futures dropped 44 points.
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