Rate sensitives, commodities lift Nifty above 5750 at close
13 Sep 2010
Equity benchmarks sustained uptrend for the 5th consecutive day and closed at fresh 31-month high, led by marvellous rally in leading sectors like banking, oil & gas, realty and metal, especially after strong industrial output data. The Sensex closed above 19000 mark and the Nifty above 5750 for the first time since January 18, 2008. Even global cues were quite supportive post Europe's Basel III norms for banks and US economic data.
The index of industrial Production (IIP) for the month of July came in 13.8%, which was better than the most optimistic expectation of about 8.4% at the best, and the average expectation of 7.8%. Rajiv Malik of CLSA expects the index of industrial production (IIP) numbers to continue to look strong.
He expects the Reserve Bank of India (RBI) to increase the reverse repo rate at a higher quantum than repo rates. He added that the central bank is likely to enter a pause mode on the interest rate from post hiking the rates on September 16.
Even a dipstick survey conducted by CNBC-TV18 on what the market expects from the RBI in which 80% of the people polled expect a rate hike on Thursday, which 20% didn't.
Markets across the globe also staged smart rally, after announcement of Basel III norms by Europe on Sunday, which were less harsh than expected. The biggest change to global banking regulation in decades, known as Basel III, will require banks to hold top-quality capital totalling 7% of their risk-bearing assets, up from just 2% under current rules.
The rules may oblige banks to raise hundreds of billions of dollars of fresh capital over the next decade. Germany's banking association, for example, has estimated its 10 biggest banks may need 105 billion euros (USD 141 billion) of additional capital. But to ease the burden on banks and financial markets, regulators gave the banks transition periods to comply with the rules. These periods, extending in some cases to January 2019 or later, are longer than many bankers originally expected.
