Indian Slump Story Receives a Strong 1k-Point Rebuttal RBI governor Raghuram Rajan’s bold moves prop up rupee and markets

SOME RELIEF

 Indian stocks rose again on Friday, capping a week in which the economic mood of the nation got a dramatic lift, thanks in large part to the overwhelmingly positive vibe that accompanied the accession of Raghuram Rajan as governor of the country's central bank on Wednesday. 

The benchmark BSE Sensex surged more than 1,000 points in the last three trading sessions while the rupee staged a strong recovery to 65.24 a dollar from a record low of 68.85. 
The measures announced by the Reserve Bank of India to support the ailing currency on Wednesday have boosted the confidence of investors unnerved by the country's worst economic performance in a decade, the slump in the currency and a ballooning current account deficit. Underpinning this upturn in sentiment is the optimism exuded by 100 top Indian chief executives polled before Rajan took over. According to the ET CEO Confidence Survey released Thursday, 42% CEOs expect economic growth to exceed 5% this year and the next. Growth hit a 5% decade low in the year ended March. The week's stock market rally has been led by index heavyweights such as ICICI Bank, BHEL and ONGC. 
The 30-share Sensex rose 1.53% on Friday to end at 19,270 points, its biggest weekly surge in four months, led by financial companies and capital goods makers. The 50-share NSE Nifty rose 1.56% to close at 5,680, above its key technical level of 5,600. 
The advance-decline ratio favoured the bulls. On BSE, 1,311 stocks advanced against 996 that declined while 146 remained unchanged. 
"The intentions and initiatives of the new RBI governor helped change sentiments in equity and currency markets. Banking stocks and other rate-sensitive stocks were the major gainers," said Dipen Shah, head, private client group research, at Kotak Securities. "However, defensive sectors like IT and FMCG under-performed." 
Private banks gained for the second day after seeing their biggest single-day gains in over four years on Thursday. The country's biggest non-state lender ICICI Bank jumped 7.37% to . 959, extending Thursday's gain of 9.2%. 
"The prices of high-beta wholesalefunded banks like YES Bank, Axis Bank and ICICI Bank were significantly undervalued two days back," said Rajiv Mehta, research analyst at IIFL. "Assuming a very moderate growth, they are looking very attractive in terms of valuations, as these banks are trading near one time or one-and-a-half times book." Foreign institutional investors (FIIs) returned to join the party — they bought shares worth $166 million, or . 1,100 crore, in the cash market and about . 1,200 crore of index futures on Thursday, exchange data showed. FIIs sold equities worth $902 million, or . 5,922 crore, in August, and $47.4 million, or . 324 crore, in September. 
In the foreign exchange market, the rupee strengthened against the dollar after Foreign Minister Salman Khurshid said the oil minister will announce plans for lowering fuel consumption on September 16. 
The partially convertible rupee ended at 65.24, 1.17% stronger than its close of 66.32 on Thursday. 
Analysts see the rupee as being the key to the prospects for market revival. "The market will bottom out once the currency stabilises at a certain level. When the rupee stabilises, it will appreciate strongly and that will bring a lot of positive sentiments," Neelkanth Mishra, India equity strategist at Credit Suisse, told ET NOW. "If the currency starts to appreciate, the sense of goodwill about the country will suddenly improve dramatically. A lot of people will jump in to buy some attractive stocks, which are now waiting on the fringes for the currency to stabilise." 
Key stock movements on Friday included BHEL, the nation's top producer of power equipment, rising 3.17% to . 141. Analysts believe a weak rupee will help shield the company from cheap Chinese imports. 
Oil marketing companies rose on reports that a decision on raising diesel prices by . 3-5 per litre, kerosene by Rs 2 and LPG by up to . 50 per cylinder will be taken after UPA Chairperson Sonia Gandhi returns from the US. 
Indian Oil Corp rose 4.13% to . 231 while ONGC rose 7.17% to . 289. 
India's biggest telecom company, Bharti Airtel, rose 5.47% to . 313 after Nomura upgraded the stock to 'buy' from 'neutral', citing its optimistic outlook on operational trends and forex impact. 
Reliance Communications rose 2.61% to . 139 after the company said it had appointed a new CEO for its India enterprise business, where revenue and profit are seen growing 30% annually over the next five years.