Market Update: Sensex surges 728 points, logs biggest rally in over 5 years on RBI move

The benchmark Bombay Stock Exchange (BSE) index Sensex, in its biggest single-day rally in over 5 years, spurted by 728.73 points to reclaim the 28,000-mark on massive buying across sectors after the Reserve Bank of India on Thursday unexpectedly cut key interest rates to boost growth.

The equity market opened with a gain of nearly 500 points.

Before trading began RBI Governor Raghuram Rajan, who had focused on quelling inflation since taking office in September 2013, lowered the benchmark repurchase (or repo) rate to 7.75 per cent from 8 per cent, the first reduction since May 2013. As the day progressed, participants, both domestic and foreign, stepped up purchases.

Investor wealth reclaimed the Rs 100-lakh crore mark.

Buying was seen across-the-board as all 12 BSE sectoral indices ended with gains in the range of 0.44 and 7.99 per cent.

The 30-share BSE barometer resumed at 27,831.16 and then touched an over one-month intra-day high of 28,194.61 before closing 728.73 points (or 2.66 per cent) higher at 28,075.55.

Previously, the gauge had soared by 2,110.79 points on May 18, 2009.

Of the 30 Sensex scrips, 28 ended in green with stocks of HDFC, ICICI Bank, ITC, RIL, SBI, HDFC Bank and L&T leading the gains.

On similar lines, the broader 50-share National Stock exchange (NSE) index Nifty opened at 8,424.50 and surged to a high of 8,527.10 before ending the day at 8,494.15, up 216.60 points or 2.62 per cent.

As many as 46 constituents surged in the 50-share Nifty index.

"We believe that this is a beginning of a big rate cut cycle. We expect a further 125 bps over the next 12 months," said Morgan Stanley analyst Chetan Ahya in a report.

The rate cut ahead of a scheduled RBI monetary policy meeting on February 3 will result in "more money in the hand of the consumers," Finance Minister Arun Jaitley said, while bankers started cutting rates within hours of the announcement.