Date:05/12/2008 URL: http://www.thehindu.com/2008/12/05/stories/2008120561351700.htm

Business

Sensex recovers 482 points

Special Correspondent

Falling inflation, hopes of rate cut by RBI lifts sentiment

MUMBAI: Falling inflation and expectation of a rate cut by the Reserve Bank of India (RBI) lifted the sentiment on stock markets as the Bombay Stock Exchange benchmark Sensex recovered 482.32 points or 5.51 per cent at 9229.75. The sentiment was also boosted by the reports that the Government was likely to announce a three-pronged fiscal package by Saturday to increase liquidity in the system.

Inflation fell to its lowest in nearly seven months to 8.40 per cent. This is likely to result in a rate cut by the central bank, market participants felt. The inflation rate eased for the fourth straight week and was lower by 0.44 percentage points in the seven-day period ending November 22 from the previous week.

The broader NSE 50-share Nifty moved up by 131.55 points or 4.95 per cent to close at 2788.

Marketmen believe that the long awaited fiscal measures, which are likely to be announced on Saturday, will definitely give an impetus to the economy.

Other than announcing measures to increase liquidity, it was reported that the measures would encourage banks to lend more to companies in the housing and automotive businesses. The package also expected to bail out exporters who have been hit hard by the global economic slowdown. The Government believes that the growth in housing, automotive and exports will have a multiplier-effect on the economy.

Market also expects that a rate cut will stimulate corporate performance as cost of funds will come down. These reports have a positive impact on markets.

The realty sector led the recovery with a huge gain of 12.44 per cent followed by metal 7.93 per cent, consumer goods 6.91 per cent, oil & gas 5.86 per cent, power 5.70 per cent and banks 5.64 per cent.