Business | Markets
Indian stocks rise 5.5% to highest close in two weeks
India's main stock index rose 5.5 per cent yesterday to its highest close in more than two weeks as expectations for an interest rate cut received a boost from slower-than-expected rise in inflation.
- Reuters
- Published: 23:35 December 4, 2008
Mumbai: India's main stock index rose 5.5 per cent yesterday to its highest close in more than two weeks as expectations for an interest rate cut received a boost from slower-than-expected rise in inflation.
Banks, automobiles and construction companies were among the gainers after a government official said the authorities were working on a stimulus package and rate cuts to revive support sagging growth.
Top lender State Bank of India rose 6.6 per cent to Rs1,169.30 and the No. 2 ICICI Bank climbed 8.8 per cent to Rs364.20 as annual inflation dropped to a seven-month at 8.4 per cent on November 22, below the previous week's annual rise of 8.84 per cent, and well below market estimates of 8.91 per cent.
A senior government official told Reuters the Reserve Bank of India (RBI) was likely to lower interest rates soon and the government was planning excise duty cuts for the automobile sector and also a package for the infrastructure sector.
"Clearly, focus is now on growth and we can expect rate cuts from the RBI and fiscal support from the government," said Anubhuti Sahay, economist at Standard Chartered bank in Mumbai.
Leading construction firm Larsen & Toubro rose 8.3 per cent, while Jaiprakash Associates climbed 13.8 per cent and Reliance Infrastructure gained 7.5 per cent on hopes a stimulus package would help spending.
The 30-share BSE index rose 5.51 per cent, or 482.32 points, to 9,229.75, its best close since November 17, with all of its components in the positive territory.
"What we saw today was a relief rally. Global cues are still a concern," said Deven Choksey, CEO and managing director of K R Choksey Shares. "Nothing is going to improve so soon so fast."
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