The benchmark Sensex jumped nearly 741 points on Friday as investors placed bets on a growth-oriented budget amid expectations of a rate cut by the Reserve Bank of India (RBI) next week.
The third quarter results of Nestle and Larsen & Toubro led to the rally for the fourth consecutive day.
The 30-share Sensex ended at 77500.57. In intra-day trade the Sensex zoomed 846.15 points to hit a peak of 77605.96.
The Nifty gained 258.90 points to 23508.40 after advancing 297.3 points to 23546.80.
Analysts said investors were optimistic that finance minister Nirmala Sitharaman could announce certain tax reliefs to improve consumption and corporate earnings. Investors also expect the FM to step up capital expenditure and focus on sectors such as railways.
They, however, cautioned if the Budget disappoints on this front, stocks could come under pressure.
The results of L&T and Nestle supported the rally, with the stocks the top gainers in the Sensex pack.
L&T surged 4.31 per cent after reporting a 14 per cent rise in consolidated profit after tax, while Nestle India rose 4.25 per cent after the FMCG major posted a 4.94 per cent increase in net profit.
Moreover, optimism that the RBI will slash the repo rate by up to 25 basis points next Friday drove buying in some of the banking & finance stocks.
“The indices are fuelled with expectations of a pro-growth budget and prudent fiscal policy. Positive global cues and better than expected results from major companies also contributed to the upward trend,’’ Vinod Nair, head of research, Geojit Financial Services, said.
At the forex markets, the rupee hit an all-time low of 86.65, but recovered its ground on account of RBI intervention and the rally in the stock markets.
The domestic currency settled at 86.6050 to the dollar against its last close of 86.62.
The unit came under pressure after US President Donald Trump warned BRICS nations once again to drop plans for a new currency or even attempt to try and diminish the importance of the dollar in world trade.
“We are going to require a commitment from these seemingly hostile Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty US Dollar or, they will face 100 per cent tariffs, and should expect to say goodbye to selling into the wonderful US Economy,” he said on Truth Social.
Repo cut bets
The RBI is set to cut its main policy rate on February 7 followed by just one more cut next quarter, according to economists polled by Reuters, who have kept their views largely unchanged from a month ago.
The steady outlook comes despite recent data showing economic growth slowed to an annual 5.4 per cent in the July-September quarter, well below the 8.2 per cent seen in the last fiscal year.
In its February 1 budget, the government is not expected to increase infrastructure spending, a main driver of growth in past years, leaving the onus on the RBI to revive the $4 trillion economy.
The central bank has injected massive liquidity into the banking system in recent days, which some economists take to mean a rate cut is imminent, despite relatively high inflation.
Over 70 per cent of respondents, 45 of 62, in a January 22-30 poll, forecast the RBI would cut its key repo rate by 25 basis points to 6.25 per cent at the conclusion of its February 5-7 meeting, the first chaired by governor Sanjay Malhotra, a former civil servant appointed late last year.
