BSE Sensex gains 173 points on easing inflation, fag-end buying

The BSE Sensex surged by 173 points on Friday on easing wholesale inflation, sustained capital inflows from foreign funds coupled with higher global cues.

Wholesale inflation (WPI) eased to a seven-month low of 5.05 per cent in January, on decline in the rate of price rise in food articles, mainly vegetables.

The decline in inflation is much on the expected lines of the Reserve Bank of India (RBI), which had hiked key interest rates by 0.25 per cent in its monetary policy review last month.

Staging a recovery after Thursday's 255-point drop, the 30-share index of the Bombay Stock Exchange resumed higher at 20,265.13, rebounding from four-month closing lows. The index then moved in a 250-point range.

Boosted by last-hour buying, it closed at 20,366.82, a rise of 173.47 points or 0.86 per cent. Friday's gain is the best since the 256.61-point jump on January 15.

The 50-share National Stock Exchange Nifty also rose by 47.25 points or 0.79 per cent to 6,048.35.

Government data released earlier this week showed retail inflation plunged to two-year lows in January. With industrial output in negative terrain and price rise under control, hopes rose that the RBI will cut rates soon, said brokers.

"The WPI inflation came in lower than estimates. Going ahead, we believe that, the Vote on Account will be watched closely. Within that, markets will try to understand the contours of the fiscal deficit. Moreover, any indirect-tax benefit to any sector may have an impact," said Dipen Shah, Head of Private Client Group Research, Kotak Securities.

IT, Teck, Refinery, Consumer Durable and banking sectors were main major gainers of the day.

Foreign institutional investors (FIIs) bought shares worth net Rs 399.40 crore on Thursday, as per the figures issued by stock exchanges.

Most of the Asian stocks ended higher following gains at the US stock market last night. Key indices in Hong Kong, South Korea, China and Taiwan firmed up by 0.54 per cent to 0.83 per cent while indices in Japan and Singapore eased by 0.04 per en to 1.53 per cent.