The BSE Sensex on Wednesday posted its biggest daily gain this month, as banks advanced on hopes the Reserve Bank of India (RBI) would continue to inject liquidity, while Larsen & Toubro (L&T) rose after the government extended interest subsidies for some exporters.
Energy shares such as Reliance Industries Ltd (RIL) also gained on hopes a government-appointed panel looking at oil and gas exploration contracts would recommend a pricing formula that could sharply raise the price of natural gas.
Broader sentiment was also underpinned by strong recent buying by foreign institutional investors, who bought a net $719 million in domestic stocks on December 24, the biggest single-day inflow since October 5, bringing their total for the year to $24.05 billion.
“Even thought FIIs are on vacation there is a very high underlying demand. Flows so far have been positive,” said Hitash Dang, vice-president at Jaypee Capital. “Every time there is a correction there are new entrants or there is again a buying opportunity,” Dang added.
The benchmark BSE index rose 0.84 per cent, or 162.37 points, to end at 19,417.46, its biggest percentage gain since November 30.
The broader NSE index rose 0.85 per cent, or 49.85 points, to end at 5,905.60, also posting its biggest gain since November 30.
Banks rose after the central bank announced plans to buy Rs 8,000 crore of bonds via open market operations on Friday, marking the fourth consecutive weekly debt purchase.
The actions from RBI brought some relief, as advance tax outflows and an increase in government’s cash balance with the RBI have temporarily exacerbated liquidity tightness in the banking sector.
ICICI Bank rose 2.4 per cent, while State Bank of India gained 1.7 per cent.
Bharat Heavy Electricals gained 1.14 per cent, while L&T ended 2.3 per cent higher after the government announced incentives to revive growth in exports, including extending an interest rate subsidy for some exporters.
RIL rose 0.9 per cent. The Rangarajan committee has given its recommendations to the Prime Minister's Office this month, and media reports say one of the proposals include a new pricing formula for natural gas that could raise prices substantially.
CARE shares rose 23 per cent from its initial public offering (IPO) price of Rs 750, as investors who missed out on the IPO allocations bought the stock due to optimism about its outlook.
However, Kingfisher shares fell 0.31 per cent after aviation minister said a revival plan submitted by the firm was not backed by a clear funding proposal. The carrier had on Monday submitted a revival plan to resume operations after having flying licence suspended in October.