Sensex soars 491 pts on rate cut hopes

Mumbai: Strong foreign fund flows, backed by expectations of a rate cut by RBI in June, sent Dalal Street investors into a frenzied buying spree on Wednesday which added 491 points to the sensex, its biggest single-day gain in over a year, to close at 20,213. As rate sensitive stocks rallied on the hopes that a lower rate of interest would spur their business, investors were richer by about Rs 1.40 lakh crore with BSE's market capitalization now at Rs 68.2 lakh crore.
   The day's trading started on a flat note but the index picked up gains through the session. One of the main reasons for the rally was RBI governor D Subbarao's statement that he was happy the rate of inflation had fallen drastically. Market players interpreted that as an indication that the central bank's decision on rates in its June policy meeting could tilt towards further reduction. The rally that took the sensex to a 52-week high was led by banking, auto, real estate and other rate-sensitive sectors.
   The recent rally in the market is also being aided by strong foreign fund flows, with major central banks around the world preferring an easy money policy to spur growth. On Wednesday, net buying by FIIs was nearly Rs 1,650 crore with the year's net inflows from this group of investors at nearly $13 billion, Sebi data showed. "It's the FII flow that is giving the market this upward momentum to the market," said Nipun Mehta of Blueocean Capital Advisors. "As the rally continues, risks are being overlooked," Mehta said.
   Among the risks that Mehta lists are reversal of the strong FII flow in case the US Fed ends its current bond buying programme (popularly QE3), if the RBI does not cut rates and the fall in gold prices does not arrest the increasing current account deficit.
   Market players also warned that the rally is not broad-based yet. Wednesday's data on BSE showed that compared to 1,466 gainers, there were 973 laggards. Another sign for this concentrated rally was of the 30 sensex constituents, where 29 closed with gains, indicating the rally is concentrated among frontline stocks.

Pak stocks scale another peak

Karachi: Pakistan's stocks scaled another peak on Wednesday after two days of volatile post-election buying and selling. The Karachi Stock Exchange's (KSE) benchmark 100-share index ended 0.45%, or 92 points, higher at 20,567 points. The index had breached the 20,000 mark for the first time on Monday as Nawaz Sharif looked set to form a stable government. AGENCIES

Silver at 2.5-yr low

Mumbai: Silver prices crashed to Rs 44,500 per kg in Mumbai on Wednesday, a level not seen since mid-December 2010, due to weak industrial demand. In the international market, the metal was trading at around $22.50 per ounce. TNN

G-sec yield at 3-yr low

Mumbai:Asharp drop in inflation to levels below RBI's comfort zone led to strong rally in the government securities market on Wednesday with the 10-year benchmark yield falling to 7.22% per annum, a three-year low level, in the 'when issued' segment. TNN