Mumbai: The Sensex today soared 684 points to an almost three-year high after the US Federal Reserve unexpectedly left its stimulus programme unchanged, easing fears of capital outflows and giving RBI Governor Raghuram Rajan some leeway before his first monetary policy review.
The US Federal Reserve yesterday surprised the market by saying it will continue with its monthly USD 85 billion bond buying programme and wait for more signs of growth recovery.
The decision may attract investments in most emerging markets, including India, this year.
The rupee also got a boost and traded at 61.80 against the dollar, up over 150 paise, when the stock markets closed for the day.
Gains on the BSE were led by banking, realty and capital goods shares, with 12 of the 13 sectoral indices rising.
State Bank of India, Tata Steel and ICICI Bank were the major winners on the Sensex.
The 30-share index opened more than 390 points higher and climbed to a peak of 20,739.69 before settling at 20,646.64, up 684.48 points or 3.43 per cent.
It was the highest level for the index since closing at 20,875.71 on November 10, 2010.
“Due to the surprising decision by the Fed to not taper down its Quantitative Easing programme, the equity markets responded positively,” said Raghu Kumar, cofounder of RKSV Securities. “The cold feet being displayed by the Fed led to a large rupee appreciation as well.”
The wider CNX Nifty index on the National Stock Exchange shot up by 216.10 points, or 3.66 per cent, to end at an almost four-month high of 6,115.55. The SX40 index on the MCX Stock Exchange closed at 12,232.1, up 430.52 points.
“We believe that now the RBI has more headroom to focus on growth supportive measures,” said Bhupali Gursale, an economist with Angel Broking. “We believe that there is a higher probability now for the RBI to calibrate and ease its liquidity tightening measures that were taken in order to contain forex volatility.”
