15th May, 2013 : ETFs gift Nifty new 28-month high, rate cut hopes fuel rally

iiflIt was an incredible rally in a really long time. Led by rate sensitives like banking, realty and autos, the Nifty hit a fresh 52-week high of 6,157.10.

Dealers attribute today’s strong up move to heavy buying by exchange-traded funds.

Duvvuri Subbarao, Governor, Reserve Bank of India, added to the cheer. He said the apex bank would take note of falling inflation before formulating its monetary policy on June 17.

IIFL’s Amar Ambani too sees hopes for a 25 bps rate cut in June. “With April WPI inflation dropping to a 41-month low of 4.89%, it gives RBI plenty of room to slash interest rates in its upcoming policy meet.”

Subbarao added that RBI’s forensic study into Cobrapost’s money-laundering allegations has found India’s three largest private lenders — ICICI Bank, HDFC Bank and Axis Bank—not guilty of money laundering but “there could be instances of tax evasion.”

There are also rumours that South Korea’s Kospi and Taiwan’s Taiex may be upgraded to developed from developing markets. This will result in huge fresh fund allocation to emerging markets like India.

Banking stocks were the star performers in trade with index heavyweights like SBI, ICICI Bank, Axis Bank and HDFC Bank leading from the front. The Bank Nifty has made a new all-time high, surging about 4% to close at 13,083.

So, broad-based was the rally that no single sectoral index ended in the red. It was heartening to see mid- and small-cap stocks participating after a long time.

The Sensex closed at 20,212, up 491 points, while the Nifty ended at 6,147, up 151 points.

Going forward, he feels markets may consolidate before attempting to take on its all-time highs.