Sensex at 2-yr high, market looks at RBI for rate cut

Hectic across the board buying over the weekend on hopes of a cut in key rates by the Reserve Bank of India (RBI) in its monetary policy meeting on January 29 helped the Bombay Stock Exchange benchmark Sensex extend gains for the second straight week as it rose over 64 points to end at more than two-year high of 20,103.53 points.

The market resumed on a strong note after Reliance Industries (RIL) announced 24 per cent jump in Q3 net profit, first increase in profit after four quarters of declining returns.
The sentiment got a boost after global credit rating agency Moody's Investors Services last Saturday retained India's sovereign rating at Baa3, with a stable outlook.

Brokers said profit-booking at the two-year high level kept the Sensex hovering sideways near 20,000- mark for the next couple of days till Thursday.

On Friday it bounced back on buying in interest-rate related stocks on hopes of a rate cut by the apex bank on Tuesday and also frantic short-coverings by operators ahead of the expiry of derivatives contract on January 31.

The Sensex later finished the week at 20,103.53, its highest closing since January 6, 2011. Last week, the 30-share index had flared up by 375.40 points, or 1.91 per cent, on pro-reform measures like partial deregulation of diesel prices and Government's decision to defer the implementation of controversial anti-tax evasion proposal GAAR by two years.

The 50-issue Nifty of the National Stock Exchange also gained 10.25 points, or 0.17 per cent, to end at 6,074.65. The key NSE index had closed at over two-year high of 6,082.30 on Monday.

Continuing capital inflow was also a key factor behind the rally. Foreign Institutional Investors (FIIs) injected Rs 3,730.81 crore in the first four days of the week. They have bought shares worth nearly Rs 17,300 crore in the current month (till January 23).

Sector-wise, realty bore the brunt of heavy selling followed by PSU, oil & gas, consumer durable and metal shares. Capital goods and FMCG scrips attracted good buying support.
Besides stock-specific developments, market players were also enthused by Finance Minister P Chidambaram's comments in Singapore on Wednesday that the government intends to widen the tax base and ramp up revenues, according to brokers.