Sensex jumps 516 points on softening inflation

Mumbai, August 29 : For the Dalal Street bulls, slower-than-expected GDP growth in the first quarter and softening of Inflation were music to the ears. Intense buying throughout the day triggered by better economic numbers helped the market settle near the day’s high with the BSE Sensex jumping 516 points to 14,564.53. Strong global cues and healthy rollover of derivatives positions also aided the rally, its best one-day percentage rise since July 23.

“The inflation data was a pleasant surprise for the market. Global cues were also positive, resulting in markets opening with a gap. Q1 GDP growth came at 7.9 per cent, which was acceptable to the market. Markets may see higher levels, in the week starting September 1,” said PK Agrawal, president, Bonanza Portfolio Ltd.

“The fall in inflation will ease the pressure on further monetary tightening by the RBI. The GDP data shows the economy is slowing. That’s expected,” said BSE dealer Pawan Dharnidharka. Strong buying was witnessed in interest rate sensitive sectors like banking, real estate and auto, as the latest data showed inflation softened for the first time in 28 weeks.

According to Morgan Stanley, a rise in the BSE index’s volatility to a 15-year high suggested a soft underbelly. “We looked at the market’s behaviour during the previous two volatility peaks of the past 15 years and conclude that the market has more to fall,” it said in a note on Friday.

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