The Indian benchmark index soared 482 points to close above 9K levels after a further fall in inflation numbers bolstered hopes of a rate cut. Realty stocks witnessed a huge rally, followed by metals and capital goods.
In the broader markets, Nifty jumped nearly 5 per cent to end at 2788.
Inflation rate slipped for the fourth week in a row to 8.40 per cent for the week ended November 22 against 8.84 per cent in the previous week. The decline has raised hopes for further cut in key rates by the RBI.
The RBI today said it would take apt action at appropriate time on rate cuts, maintaining that the liquidity position has been comfortable since November.
“The slowing growth momentum is the bigger concern. With inflation already in a downtrend and expected to fall sharply going forward, we expect RBI to continue cut rates to tackle the faltering growth,” said Sujoy Das, head of fixed income at Bharti AXA Investment Managers.
The money markets have already factored in a rate cut, with yields on 10-year bond yields already falling below 7 per cent. “We expect the yields to fall below 6 per cent or even lower in the next six months,” he said.
All sectoral indices on the BSE finished higher. Rate sensitive sectors were buoyed by the expectations of a possible rate cut by RBI. The BSE realty index led the gainers. It jumped 12.4 per cent to end at 1,753 levels. Top gainers in the group were HDFC, Orbit Corp and Anant Raj Industries, each up more than 17.7 per cent.
The BSE metal index gained 7.9 per cent and the capital goods index surged 6.9 per cent.
JSW Steel, up 19.5 per cent, was the biggest gainer in the metal pack. Suzlon Energy, Usha Martin, L&T and Praj Industries were the major gainers in the capital goods space.
“Indian markets are riding on the back of the pull back in global markets. Hopes of stimulus packages have boosted global markets. But again these are all bear market rallies and such rallies would be seen intermittently throughout 2009,” said Dharmesh Pancholi, an investment advisor.
He further said stocks of battered down sectors would outperform the markets during such rallies.
Among the Sensex stocks, Tata Steel, JP Associates and Tata Motors were the biggest gainers, each up more than 13 per cent.
The small cap index on the BSE jumped 2 per cent while the mid cap index gained 3.3 per cent.
Asian markets were mixed on Thursday as investors waited for key interest rate decisions in Europe later in the day and braced for more bad news from Friday's U.S. jobs report. Oil prices fell to fresh three-year lows.
Japan's Nikkei 225 average fell 79.86 points, or 1 percent, to 7,924.24 as automakers continued to slide amid signs of slumping demand for new vehicles in the United States and Toyota said it was suspending production at three plants in Japan later this month.
Hong Kong's Hang Seng index dipped 0.6 percent to 13,509 points, but mainland China's Shanghai Composite index rose 1.9 percent to 2001.5 on news that a government fund announced it had bought shares in a major bank.
New Zealand's share index rose 0.9 percent after the central bank slashed its cash rate by a record 1.5 percentage points.
Elsewhere, markets in Singapore and Indonesia rose, but those in Taiwan, Thailand, the Philippines and Malaysia fell.