The almost-$1 trillion euro zone bailout package has washed away, for now, all worries over the return of yet another bear phase in the markets, world over. And, the consensus among market players is that the rally should continue.
The Bombay Stock Exchange Sensitive Index surged 3.35 per cent today to record its biggest single-day gain in almost a year, as world equities rebounded after the European Union and the International Monetary Fund detailed a $955-billion bailout package to stem the euro zone’s spiralling debt troubles. Also, in the first such action, the European Central Bank said it would intervene in the bond markets as part of wider efforts to protect the euro zone.
Sentiment was also buoyed by comments from India’s policy makers that the crisis in Greece would have only a minimal impact on India and that the euro zone’s woes could prompt foreign investors to move to the safer Indian economy.
Finance Secretary Ashok Chawla said today the impact of Greece would be minimal. “In fact, in the short run it might help us. Investors will find India a safe haven post-Greece,” Chawla said on the sidelines of a conference. He added the government would consider raising the foreign investment limit in government bonds, but that was not dependent on the Greek issue alone.
| COVER FROM CRISIS | ||
| ASIAN MARKETS | ||
| 10-May | % chg* | |
| Jakarta Composite | 2,850.43 | 4.06 |
| Nifty | 5,193.60 | 3.50 |
| Sensex | 17,330.55 | 3.35 |
| Hang Seng | 20,426.64 | 2.54 |
| Straits Times | 2,880.48 | 2.10 |
| Kospi | 1,677.63 | 1.83 |
| Nikkei 225 | 10,530.70 | 1.60 |
| Shanghai Composite | 2,698.76 | 0.39 |
| BSE SECTORAL INDICES | ||
| Realty | 3,353.57 | 6.17 |
| Metal | 16,929.39 | 6.06 |
| Bankex | 10,921.21 | 3.95 |
| Auto | 7,764.43 | 3.32 |
| Power | 3,086.35 | 3.26 |
| Oil & gas | 10,129.74 | 3.15 |
| IT | 5,275.86 | 2.74 |
| Capital goods | 13,530.11 | 2.13 |
| Consumer durables | 4,599.34 | 2.11 |
| FMCG | 2,849.51 | 1.11 |
| Healthcare | 5,301.71 | -0.24 |
| * over previous close Source: BSE, Bloomberg | ||
Asian stocks rose sharply, after European leaders addressed worries about the debt levels of Greece and other European nations. The key benchmark indices in China, Hong Kong, Japan, Indonesia, South Korea, Singapore and Taiwan rose between 0.39 per cent and 4.06 per cent.
The Sensex took the cue and ended the day at 17,330.55, up a whopping 561.44 points. The broader S&P CNX Nifty of the National Stock Exchange surged 175.55 points, or 3.50 per cent, to settle at 5,193.60.
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The positive sentiment was corroborated by the strong market breadth, too. On the Bombay Stock Exchange, there were nearly four gainers for every single loser. Some of the sectoral indices registered gains in excess of 6 per cent each.
“The decision of the European policy makers to unveil a $960-billion loan plan to end the sovereign debt crisis in the euro zone pulled up the markets,” said Karun Mutha, senior VP & head - Derivatives, HSBC InvestDirect Securities (India). “The rally, hopefully, should continue as the Bank of England continues to hold its key rates. Expectations of good monsoon and better IIP numbers would also help the market to climb back and test the earlier highs,” added Mutha.
Quite expectedly, experts hope the current “bullish sentiment” to sustain for some time in a manner similar to the effect that the first round of liquidity injection had on the global markets.
“This is the second dose of liquidity injection that will see the return of risk trades,” said Sanjeev Patni, president & head of Institutional Equities, Prabhudas Lilladher. “The markets would continue to trade positively for some time till people analyse the details of the liquidity scenario,” he added.Meanwhile, Mutha said the “markets will test 5,230 and eventually 5,400 on back of renewed buying interest.”
Index heavyweights Reliance Infra, Tata Steel, Hindalco, Tata Motors and DLF gained more than 6 per cent. Reliance Industries surged 4.5 per cent, which added significant support to the markets. Reliance Infrastructure jumped 8.5 per cent to Rs 1,062.85, recovering from a 7 per cent fall on Friday.
Meanwhile, an hour after the trading session came to an end in India, the Bank of England announced that it had decided to keep the benchmark interest rate at a record low of 0.5 per cent. The central bank also maintained its bond holdings target at £200 billion ($300 billion).
The impact was clearly visible. The UK’s FTSE was trading up more than 5 per cent or nearly 300 points. Austria’s ATX gained over 9 per cent, while the benchmark indices of Belgium and France surged more than 8 per cent.
While the euro strengthened the most in 18 months against the yen, futures contracts on the Standard & Poor’s 500 index touched its daily limit. Citigroup and Bank of America jumped more than 5 per cent. The S&P financial index climbed 5.6 per cent and was the top percentage gainer among S&P sectors. The Dow Jones industrial average was up 416.72 points, or 4.01 per cent, at 10,797.15. The Nasdaq Composite Index was up 101.16 points, or 4.46 per cent, at 2,366.80. Howard Silverblatt, an analyst at Standard & Poor’s, said that based on their records dating back to the late 1960s, the S&P 500’s percentage and point gains at the opening were both records. The Dow’s surge was the biggest intraday move since March 2009, according to Dow Jones Indexes. Advancers outnumbered decliners on the New York Stock Exchange by a ratio of about 30 to 1. On the Nasdaq, more than seven stocks rose for every one that fell. The provisional figures in India showed that foreign institutional investors (FIIs) were net buyers on Monday at Rs 264 crore. Domestic institutional investors remained relatively subdued with net purchases of Rs 30.25 crore.
(With inputs from Reuters)