Mumbai, Jan 24 (IANS): A benchmark index for Indian equities markets soared past the 17,000-mark as markets cheered an unexpected cut in the cash reserve ratio (CRR) by the Reserve Bank of India Tuesday. Banking stocks led the gainers list.
After nearly two years of tight check on money supply to tame inflation, the RBI took steps to infuse more liquidity in the system by reducing the cash reserve ratio by 50 basis points in a bid to help industry out of the current downturn.
The 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE), which opened at 16,806.72 points, was ruling at 17,030.84 points around 2.35 p.m., up 279.11 points or 1.67 percent from its previous close at 16,751.73 points.
The 50-scrip S&P CNX Nifty of the National Stock Exchange also rose to trade at 5,136.55 points -- up 1.79 percent or 90.4 points from its previous close.
Broader markets were also ruling higher with the BSE 500 index ruling 1.68 percent higher from its previous close. The BSE midcap index was ruling 1.33 percent up and the BSE smallcap index gained 0.64 percent.
All 13 indices on the BSE were in the green. Capital goods, metals and realty stocks were among other major gainers.
"It is at least a sigh of relief in the sense that monetary tightening policy is getting reversed and now there is hope of interest rate cut in the future," said D.K. Aggarwal, chairman and managing director, SMC Investments and Advisors.
"Sensex touching 17,000 after the policy announcement is a testimony to the optimism that has risen among the investors on the street," he added.
The cash reserve ratio (CRR), the amount against deposits which commercial banks have to keep as liquid assets such as cash, has been lowered by 50 basis points to 5.5 percent from 6 percent.
"This step will release Rs.320 billion into the system," Reserve Bank of India (RBI) Governor D. Subbarao said in a statement, soon after presenting the third quarter review of the monetary policy for the current fiscal year.
The market breadth was positive with 1,535 stocks advancing compared to 1,171 on the decline. About 120 scrips were unchanged.
Among major gainers from the banking space were SBI, up 5.33 percent; ICICI Bank, up 3.83 percent and HDFC Bank, up 1.66 percent.
L&T was the top gainer, up 5.59 percent.