Markets rise on CRR cut, Sensex closes tad below 17,000 (Roundup)

January 24th, 2012 - 8:14 pm ICT by IANS  

Sensex Mumbai, Jan 24 (IANS) Indian equities markets rose Tuesday with investors cheering an unexpected cut in the cash reserve ratio (CRR) by the Reserve Bank of India. A benchmark index went 244 points up to cross the 17,000-mark, the highest closing level in 10 weeks, but slipped to close just a tad below the day’s high.

After nearly two years of a tight check on money supply to tame inflation, the RBI took steps to infuse more liquidity into the system by reducing the cash reserve ratio by 50 basis points in a bid to help the industry get out of the current downturn.

The 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE), which opened at 16,806.72 points, closed at 16,995.77 points, up 244.04 points or 1.46 percent from its previous close at 16,751.73 points.

The Sensex had soared more than 298 points to an intra-day high of 17,050.32 points.

The 50-scrip S&P; CNX Nifty of the National Stock Exchange also rose to close at 5,127.35 points — up 1.61 percent or 81.1 points from its previous close.

Broader markets also moved up with the BSE 500 index ending 1.55 percent higher from its previous close. The BSE midcap index closed 1.38 percent up and the BSE smallcap index gained 0.7 percent.

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.

All 13 indices on the BSE ended in the green. Capital goods and banking stocks led the gainers list followed by metals and realty stocks.

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.

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