Mumbai: Indian markets on Monday surged nearly 1.4% following gains in rate sensitive stocks as falling crude oil prices and slowing economic growth boosted speculation that the Reserve Bank of India (RBI) will ease monetary policy in its next bi-monthly review meeting.
The benchmark Sensex closed 553.42 points, or 1.39%, higher at 40,267.62, while the NSE Nifty 50 index finished at 12,088.55, up 165.75 points, or 1.39%. Year to date, the Sensex and Nifty indices have risen nearly 12% each.
"Political stability and limited impact of a global trade bar on the economy also made India an attractive opportunity for investors,'' said Satish Kumar, research analyst at Choice Broking.
India's GDP for the March quarter grew 5.8%, the slowest pace in five years, according to official data released on Friday. At 5.8%, growth was slower than the median 6.3% estimated in a Bloomberg survey and an unchanged 6.6% expansion in October-December
In the last five sessions, international crude oil prices have fallen over 13%.
The decision of the RBI’s monetary policy committee (MPC) is due on Thursday in which it will likely cut the key policy rate by 25 basis points, according to economists and bankers surveyed by Mint.
"The macroeconomic environment has been marked by slowing growth prospects and soft inflation readings. GDP growth moderated to a five-year low. The headline inflation reading continues to remain well within the mid-point of India’s inflation target; the election outcome has been viewed to be favorable by market participants with the NDA government securing a majority. The same affirms continued policy reforms by the newly elected government to rejuvenate growth. Given the dynamics, the MPC is perceived to continue with its easy policy regime with another 25bps repo rate cut at the upcoming policy meet, `` said Edelweiss Finance in a note to its investors.
"The MPC has slashed interest rates by 50bps during CY19 so far and this will be the third successive rate cut. However, effective transmission of the delivered rate cuts remains crucial in order to revive growth and hence a front-loaded 50bps cut is unlikely at this juncture", the Edelweiss report added.
Rate sensitives like banking, auto and FMCG stocks have risen on the bets of rate cut hopes. BSE Bankex rose 1% with banking stocks like, Indusind Bank rose 3.7%, HDFC Bank 1.2%, Yes Bank and Kotak Mahindra Bank gaining 1% each nearly, State Bank of India up 0.7%.
BSE Auto Index surged 2% with Hero MotoCorp adding 6%, TVS Motors 4.3%, Bajaj Auto 4%, Ashok Leyland 3.2%, Maruti Suzuki India 3% and Tata Motors 1.2%.
BSE FMCG index rose 1% with Dabur India gaining 3%, Hindustan Unilever 3%, Godrej Consumer 3%, Nestle India 2%, Marico 1.4%, Britannia 1.3%.