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Bernanke lifts market mood, Sensex zooms

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BS Reporter Mumbai
Last Updated : Jan 20 2013 | 2:28 AM IST

Short-covering in oversold sectors like IT and banking.

Indian stock markets responded positively to US Federal Reserve chief Ben Bernanke’s Friday speech, which raised hopes of further monetary stimulus in the world’s biggest economy. This, coupled with short-covering in beaten down sectors, helped the Bombay Stock Exchange Sensitive Index, or Sensex, gain 3.58 per cent — the highest single-day rise since May 2009.

“Markets rose as short positions were covered. This is due to a short trading week ahead due to markets being shut on Wednesday and Thursday. But still, even the bravehearts would wait and watch before entering the markets,” said Ambreesh Baliga, chief operating officer, Way2Wealth Brokers.

The Sensex rose 567 points to close at 16,416. The S&P CNX Nifty was up 171 points or 3.62 per cent at 4,919. In the broader market, 1,243 advances overwhelmed 213 declines on a robust volume of 546.4 million shares.(Click here for table & garph)

Since the beginning of August, Indian stock markets had fallen 13 per cent (till last Friday), hurting investor sentiment. Foreign institutional investors (FIIs) became buyers once again with purchases worth Rs 366 crore. However, domestic institutional investors, who had been supporting the market, sold shares worth Rs 325.50 crore.

Other Asian markets also reacted positively to Bernanke’s speech. The Hang Seng and Nikkei rose 1.44 per cent and 0.61 per cent, respectively. In Europe, the Euro Stoxx 50 was up 2.18 per cent, Germany’s DAX rose 1.92 per cent and CAC 40 of France gained 2.3 per cent. The US markets also rose sharply in opening trade.

The Shanghai Composite Index of China fell 3 per cent on further liquidity tightening. China broadened the reserve requirement that commercial lenders have to deposit with the central bank to control liquidity and inflationary pressures. The move is expected to suck out 900 billion yuan ($140 billion) from the banking system over the next six months.

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Domestic factors also played an important role in improving market mood. Traders said the mood was better as the government was able to resolve issues surrounding the Lok Pal Bill on Sunday. This could help speed up decision-making in other areas.

Among sectors, IT companies received the thumbs-up from the market, as they stand to gain if the outlook for the US market improves. The IT index rose 5.06 per cent, with TCS gaining the most at 7.5 per cent. The metals, banking, realty and capital goods indices rose 4-4.6 per cent each. JP Associates, Jindal Steel, Tata Steel and L&T rose 5-7 per cent.

Reliance Industries, which has lost 30 per cent since the beginning of the calendar year, rose 5 per cent, the highest single-day rise since November 2009. Banking stocks, which have seen a sharp sell-off in recent weeks over credit demand worries, recovered sharply. State Bank of India rose 2.7 per cent, ICICI Bank 4.6 per cent and HDFC four per cent. With the Reserve Bank of India announcing draft guidelines for new banks in the private sector, shares of banking licence hopeful L&T Finance Holdings closed 10 per cent higher.

However, market players are cautious. Said Saurabh Mukherjea, head of equities at Ambit Capital, “The overall trend for equities remains bearish.” “Such rallies will come in the downward journey as players will occasionally see hopes of Fed intervention to aid the US economy,” added Mukherjea.

Market players will keenly watch first-quarter gross domestic product numbers due out tomorrow and inflation numbers later in the week.

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First Published: Aug 30 2011 | 12:37 AM IST

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