Sensex soars 516 points on EU debt deal; Rs gains 0.74, highest in 11 months.
The Diwali spirit lingered in the markets on Friday, with Indian shares joining a global rally. An agreement by European leaders late on Wednesday to help contain the region’s two-year debt crisis boosted investors’ risk appetite and forced traders to cover their bearish bets.
The Bombay Stock Exchange (BSE) benchmark, the Sensex, surged 515.97 points, or nearly three per cent, to close at 17,804.80 on Friday. This was the highest close for the 30-stock index since August 3. This was a first full session for the Indian market after a short muhurat trading session on Wednesday and a holiday on Thursday.
At the National Stock Exchange (NSE), the 50-stock Nifty climbed 3.05 per cent, or 158.90 points, to 5,360.70. The exchange’s volatility index, India VIX, a gauge of traders’ perception of near-term risks in the market, based on options prices, dropped nearly eight per cent to 20.89. This is the lowest level for the index since August 4, a day before S&P’s downgrade of the US AAA credit rating.
Friday’s stock market rally added Rs 1.4 lakh crore to investors’ wealth, data compiled by BS Research Bureau showed.
| DUDS AND FIREWORKS | ||
| Global indices | Oct 28 | % chg* |
| The US (2310 hrs IST) | ||
| S&P 500 | 1,284.16 | -0.03 |
| Nasdaq Composite | 2,732.07 | -0.24 |
| Dow Jones Indus Avg | 12,233.20 | 0.20 |
| Europe (2310 hrs IST) | ||
| CAC 40 | 3,348.63 | -0.59 |
| FTSE 100 | 5,702.24 | -0.20 |
| Asia | ||
| Nifty | 5,360.70 | 3.05 |
| Sensex | 17,804.80 | 2.98 |
| Hang Seng | 20,119.24 | 1.68 |
| Nikkei 225 | 9,050.47 | 1.39 |
| * change over previous close Compiled by BS Research Bureau Source: Bloomberg | ||
“The stock market rebound was initially triggered by short-covering but is likely to develop more momentum during this ‘risk-on’ period in financial markets, consequent to favourable policy developments in Europe,” said Arjuna Mahendran, managing director and head of investment strategy, Asia, at HSBC Private Bank. “However, it could fizzle out by late November if the lack of political consensus on measures to address the burgeoning US sovereign debt problem continues to drag on,” he added.
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Foreign institutional investors pumped in Rs 2,166 crore in Indian shares on Friday, while domestic institutional investors sold shares worth Rs 1,078 crore, provisional data on the BSE website showed.
Among major Sensex gainers, Hindalco soared 10.9 per cent to Rs 142.2 and Sterlite Industries gained 8.8 per cent to Rs 132.9. DLF, Jaiprakash Associates, Jindal Steel, Tata Motors and ICICI Bank all gained more than seven per cent.
All sectoral indices on the BSE ended in the positive territory. The BSE Metal Index rose 6.3 per cent, while the BSE Realty index gained 5.3 per cent.
The market breadth was positive, with 1,728 advancing stocks on the BSE compared with 1,139 stocks that declined from their previous close.
However, some experts believe problems in the euro zone are not over and have raised questions over the durability of the market rally. “Financial markets’ fate in the coming weeks and months will continue to be decided primarily by what is determined in euroland,” said Christopher Wood, chief equity strategist at CLSA Asia Pacific Markets, in his ‘Greed & Fear’ newsletter to clients on Friday.
Wood doesn’t believe in the durability of the current global rally in “risk” assets and is of the view a “euroquake” is coming, sooner or later. “That euroquake should coincide with more deflationary market action, be it a commodity correction or a deleveraging rally in the US dollar,” he added.
“For the rally to be sustainable, we need to see if the current plan for the euro crisis is a permanent solution. Given the limited details of the plan known to the markets, it will be very difficult for the plan to deliver a sustainable rally,” said Anand Shah, chief investment officer at BNP Paribas Mutual Fund. Earlier, markets in Asia added to their Thursday’s gains and closed higher. Hong Kong’s Hang Seng gained 1.7 per cent, Singapore’s Straits Times rose 2.04 per cent and Japan’s Nikkei 225 index advanced 1.4 per cent.