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

The BSE Sensex crossed the 17,000 mark to 10-week high as the Reserve Bank of India (RBI) cut cash reserve ratio (CRR) to infuse liquidity in the system before easing a little to close at 16,995.77 - up 244 points or 1.46 per cent.

The 30-share barometer opened with gains and remained in the positive terrain through the day. It touched an intra-day high of 17,050.32, a level not seen since November 15.

The 50-issue National Stock Exchange index Nifty, meanwhile, regained the 5,100 level, adding 81.10 points, and closed at 5,127.35.


The gain was on account of RBI lowering the CRR - the amount of deposits the banks are required to keep with RBI in cash - by half a percentage point (50 basis points). The move will inject Rs 32,000 crore in the financial system and signals that lending rates may be cut in the coming months.

"The CRR cut by RBI was perceived by the market as the policy shift from inflation fighting to reviving growth. Positives from the RBI policy decision appear to be factored in and investors should increasingly track crude oil and dollar movements from here on," said Milan Bavishi, Research Head at Inventure Growth & Securities.

RBI kept the short-term lending rate unchanged - a move that was broadly discounted by the market.

However, the central bank cut 2011-12 GDP growth estimate to 7 per cent, from 7.6 per cent projected earlier. It expects inflation to be at 7 per cent in March.

All the 13 sectoral indices closed with gains of up to 3.30 per cent. Capital goods, banking, metal, auto and realty led the gains.