Mumbai/Nagpur: The BSE Sensex rallied as much as 550 points, while the Nifty jumped above the key 7,150 mark on Tuesday on hopes that Reserve Bank Governor Raghuram Rajan will cut repo rate. The rupee rallied for the third straight day, rising to 68.26 per dollar on Tuesday.
Bets of an out-of-turn rate cut have gained momentum after Finance Minister Arun Jaitley retained FY17 fiscal deficit target at 3.5 per cent of GDP despite increasing expenditure for rural and infrastructure spending. The RBI had last cut interest rate in September.
“The necessary condition for a rate cut has been met with fiscal deficit target retained at 3.5 per cent… That is increasing expectations of an inter-meeting rate cut in the market,” said Anindya Dasgupta, treasurer at Barclays.
Gains were led by rate sensitive banking stocks, which rallied as much as 6 per cent. ICICI Bank, Punjab National Bank and IndusInd Bank were among the top Nifty gainers. Auto and realty stocks also witnessed buying interest.