Sri Lanka Raises Interest Rates

The Sri Lanka Central Bank increased its interest rates by half a percentage point today to curb double-digit inflation - the highest in Asia and stem a decline in its currency. This is the third rate hike this year and has come two weeks ahead of a scheduled review. The bank had left the rate unchanged on September 15, and was due to review it on October 13.

The monetary board observed that inflation has not declined to a satisfactory rate as yet and an unusual increase in lending by commercial banks and substantially higher borrowings from the Central Bank are fuelling inflation. Sri Lanka's economy continues to expand at an 8 percent pace.

Asian Stocks Continue to Rise

Asian stocks continued the upward movement after a rebound in U.S. home sales bolstered confidence that consumer spending will be sustained in US. Data released yesterday showed an unexpected rise in new home sales for the month of August and helped ease concerns about a housing market slump. South Korea added nearly 0.85 per cent while Indonesia and Shanghai ended with gains of around 0.7 per cent each. Japan added close to 0.5 per cent and Singapore closed with gains of nearly 0.4 per cent. Malaysia and Hong Kong ended with modest gains. Thailand was the only loser, declining nearly 0.75 per cent.

India's sensex gained marginally on the expiry day of september futures, amidst relative volatility and mixed trends across sectoral indices. Strong gains in banking stocks was the highlight of the day for the Indian markets.

The 30-share BSE Sensex rose 13.83 points or 0.1 per cent to close at 12,380.74, moving between 12,340.17 and 12,431.79 intra day. The broader 50-share NSE index S&P CNX Nifty lost 7.55 points or 0.2 per cent to 3,571.75.

The major Sensex gainers were HDFC Bank (+4.81%), HDFC (+3.27%), ICICI Bank (+2.99%), SBI (+2.97%), Ranbaxy (+2.24%). Major Losers were L&T, TCS (-2.34%), Maruti (-1.92%), Reliance Communication (-1.88%) and Satyam (-1.64%).

Banking stocks rallied strongly for the third straight day, reflecting hopes of declining interest rates following indications from US that the Fed is done with its hiking spree as also a substantial decline in crude prices over last few weeks. There is a view gaining ground among bankers in India that chances of further rate hikes by RBI in near future are low. Oriental Bank was the star performer with about 7% gains; Union Bank, UTI Bank, Bank of India and Bank of Baroda all gained around 6.5 per cent each. Kotak Mahindra gained close to 6 per cent while Canara Bank added more than 5 per cent.

A good day for Asian stocks

Mumbai Sensex ended 45 pts (0.37%) higher on wednesday following a firm trend in Tokyo's Nikkei and Hong Kong's Hang Seng. Nikkei 225 gained 2.51% to finish at 15,947.87 - this is its biggest single day gain in two months. The Hang Seng index rose 1.23% to 17,521.51. US stocks posted handsome gains on Tuesday as investors cheered the strong consumer confidence report. Dow Jones closed at 11,669 (its highest level in more than six years) and Nasdaq Composite at 2,261.

In Mumbai, Wednesday was a day of sustained buying by funds in blue chip stocks, despite some volatility just ahead of the month's futures contract expiry. The September futures contracts are due for expiry this Thursday. Sensex had touched an intra-day high of 12,442.82, before selling began in afternoon trade taking it to an intra-day low of 12,339.98 and finally settled at 12,366.91.

The major gainers on Sensex were Reliance Energy (+3.88% after a long period of range-bound movements), Maruti (+1.79%), HDFC (+1.78%), Cipla (+1.75%) and ICICI Bank (+1.34%). Major losers were Hero Honda (-1.37%), Wipro (-1.16%), L&T (-1.08%), Tata Motors (-0.89%) and Satyam (-0.87%).