Diesel prices hike, Sensex zooms 4%

Stocks: The government's bold decision to hike diesel price and approval of a new economic stimulus plan by US Federal Reserve pushed the BSE benchmark Sensex up by a robust 715 points to end at 14-month high during the week.

Reports of a new 'Quantitative Easing' plan by US Fed and hopes India will take more bold steps on economic reforms after hiking diesel price boosted the market sentiment.

The sentiment remained positive throughout the week, despite inflation rising by a higher-than-expected 7.55 per cent in August, which may restrain RBI from cutting interest rates at its monetary policy review next week, said dealers.

The 30-share BSE benchmark resumed higher at 17,780.93 and touched 18,000 level after six months to 18,498.54 before concluding the week at 14-month closing high at 18,464.27, showing a net gain of 714.62 points, or 4.03 per cent. The Sensex had closed at 18,518.22 on July 26, 2011.

The 50-share NSE index Nifty also shot up by 218.95 points, or 4.09 per cent, to close at nearly seven-month high of 5,577.65.

"Sensex rallied 2.5 per cent on Friday in response to Government's first major move to curb fiscal deficit by raising diesel price and announcement of economic stimulus by the US Federal Reserve. Aviation, retail and cable TV services shares rallied on hopes of green signal to hike in FDI cap," said Sanjeev Zarbade, VP-Private Client Group Research, Kotak Securities.

"After three years of policy paralysis, the government has broken the jinx. Market had been pessimistic for long as only bad news were coming out like CWC, 2G, coal, mining scams etc which made some FII to always go short on Indian shores hoping nothing positive can come," Kishor Ostwal, CMD, CNI Research Ltd, said.

"But Government acted in a vibrant fashion for the last two days. It raised diesel price by over Rs 5 per litre and also announced FDI in multi-brand retail, FDI in power exchanges and FDI in civil aviation. This is a strong and big trigger for the equity markets," he said.

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