Indian equities end green, recover from bear excesses (Roundup)

October 31st, 2008 - 8:04 pm ICT by IANS  

Mumbai, Oct 31 (IANS) After the bear market excesses of the last few weeks, Indian equities bounced back sharply Friday with a key equities index closing with a gain of 743.55 points or 8.22 percent - the biggest single-day gain in recent weeks.Analysts said the bounce back was expected because after a bout of bear market excess as was witnessed earlier this week with the key index going even below the 8,000 mark, some kind of recovery was very much on the cards due to short covering.

Sentiment was also helped by the big upswing in the US markets a day earlier following the cut in the key interest rate by the US Federal Reserve to 1 percent, the lowest in the modern era.

The last time the key interest rate was cut to 1 percent was in 2000 after the bursting of the dot com bubble, analysts said, adding that the rate cut was anyway expected since the last couple of weeks because the US Fed really had no other alternative.

Markets opened strong Friday with the benchmark 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE) up more than 300 points over its previous close and rallied upward throughout the day to finish at 9,788.06, up 743.55 points or 8.22 percent from its previous close at at 9,361.66 points.

The situation was no different at the National Stock Exchange (NSE) where its broader 50-share S&P CNX Nifty index closed at 2885.60, up 188.55 points or 6.99 percent from its previous close at 2697.05 points.

The BSE midcap index closed at 3,200.02, up 105.54 points or 3.41 percent from its previous close at 3,094.48 points.

The BSE smallcap index finished at 3,765.11, up 90.50 points or 2.46 percent from its previous close at 3,674.61 points.

None of the sectoral indices suffered losses and metal, oil and gas, bank and telecommunication, media and technology stocks gained the most in that order.

Among the stocks that make up the Sensex only Ranbaxy Laboratories and Tata Consultancy Services reported losses of 1.97 and 0.93 percent, respectively.

The top gainers were Mahindra and Mahindra up 23.09 percent, Housing Development Finance Company, up 17.48 percent, Jaiprakash Associates, up 16.55 percent and ICICI Bank up 15.50 percent.

As many as 1,577 or 61.24 percent scrips advanced, 916 or 35.57 percent stocks declined and 82 or 3.18 percent remained unchanged.

Analysts were, however, cautious to point out that despite the upward rally, there is still little depth in the market as investors continue to be jittery, especially now that the US Consumer Confidence Index announced Thursday has hit an all-time low.

The global financial problems were now definitely creeping into the real economy and it will take some time before investors really come to grips with the situation, they said.

“It is too premature to say there is a definite bullish trend in the market,” said Jagannadham Thunuguntla, head of the capital markets arm of India’s fourth largest share brokerage firm, the Delhi-based SMC Group.

“Just too much has happened in the last two months and investors are still shell-shocked and trying to understand the state of the global economy,” Thunuguntla said.

He said although US markets surged Thursday, Asian markets have shed values Friday despite an interest rate cut Friday by the Japanese central bank to a near zero level of 0.3 percent from 0.5 percent earlier.

When Indian equities markets opened Friday morning, both the Nikkei, key index of the Tokyo Stock Exchange and the Hang Seng, key index of the Hong Kong Stock Exchange were down about 2 percent each.

The Nikkei fell further during the day and closed 5.01 percent down while the Hang Seng was currently 5.05 percent down.

“So you can’t say that the Indian markets are really following global cues,” Thunuguntla said, adding “the Indian market bounce back was expected as there have been bear excesses and the Sensex had even gone into 7,000 levels Monday.”

“Bear excesses are always followed by a sharp bounce back and there is certainly short covering but it is far too early to say that bulls are back in business,” he said.

He also said that with the October series of futures and options ending Wednesday and a new series beginning Friday, there could also be some position building, which could be helping the bounce back.

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