Economic Times

Mumbai, Nov 3:  Stocks opened sharply higher on Monday welcoming the Reserve Bank of India’s surprise rate cut. Metals, real estate and banking stocks 
spearheaded the rally.

National Stock Exchange’s benchmark Nifty soared 137 points or 4.76 per cent to 3023. Bombay Stock Exchange’s 30-share Sensex gained 421 points or 4.3 per cent 10209 from Friday’s close.

“When markets open higher with a gap, index would have retraced 30 per cent from its low it touched on Saturday. It is natural to expect profit booking at higher levels. Sensex has resistance at 10250, which is 380 points higher from its Friday close. 10800 and 11800 are the two major hurdles on way up, while support comes in at 8900.

In a major move to inject an additional liquidity into the system, Reserve Bank of India on Saturday cut key deposit requirements for banks by 1 per cent and its short-term lending rate by 0.5 per cent, a decision that may help soften general interest rates.

The decisions to cut the cash reserve ratio and statutory liquidity ratio by one per cent each and repo rate by 0.50 per cent come a week after the busy season credit policy review by RBI in which it had given an assurance of more measures to boost economic growth.

The cut in banks' bond reserve requirements will take effect from Nov 8, while the cut in its repo rate from Nov 3. The cut in banks' cash reserve requirements will take effect in two steps -- one from the fortnight beginning Oct 25 and the second takes effect from Nov 8.

Hailing RBI's latest policy package to infuse additional liquidity as a signal for a cut
in interest rates, Finance Minister P Chidambaram today said he will ask the PSU banks to consider lowering lending rates.

Meanwhile, Asian stocks edged up for a fifth straight day on Monday on hopes that policy efforts so far to dampen the impact of the financial crisis would ultimately take hold. Expectations of more interest rate cuts this week from Australia, Britain and the euro zone following last week's reductions from China, India, Japan and the United States among others has at the least slowed the panicked selling of risky assets that dominated most of October.

Hong Kong’s Hang Seng climbed 5.32 per cent, Singapore’s Straits Times soared 5.09 per cent and South Korea’s Kospi rose 2.91 per cent. Japanese markets are closed for the Culture Day holiday.