Global cues, industry data help Sensex reclaim 19k

Massive short-covering in stocks across sectors saw the Bombay Stock Exchange (BSE) Sensex reclaim the 19,000-mark today, after a gap of over 32 months. The buoyancy came on the back of a rise in stock markets around the world and robust domestic industrial growth data.

The Sensex rose 2.17 per cent, or 408 points, at 19,208. The S&P CNX Nifty of the National Stock Exchange was up 2.13 per cent, or 119 points, at 5,760. The Sensex was just 2,000 points shy of its all-time high of 21,206, touched in January 2008.

The country’s industrial production rose by a robust 13.8 per cent in July, compared with 7.2 per cent in the corresponding quarter of the previous year.

“There was desperation among short sellers in the domestic market, as they were caught off-guard today. The Nifty had opened at a discount, but within a few minutes, the index was trading with gains of over 70 points. This resulted in massive short-covering,” said the chief strategist at a leading mutual fund house.

“Today, it was a clear cut case of short-covering, especially in the banking and metals space,” reiterated the vice-president at a leading FII.

Morgan Stanley, meanwhile, has estimated a probability weighted Sensex target of 19,400 for December 2010 and 22,100 for December 2011.

Equity markets surged in Europe following the announcement of an agreement on Basel III norms for banks, which were not as harsh as expected. The Paris CAC 40 rose 1.08 per cent. The London FTSE gained 1.12 per cent, while the Frankfurt DAX was up 0.92 per cent.

In Asia, the Taiwan Weighted Index was the top gainer, up 2.55 per cent, followed by the Sensex. Hong Kong’s Hang Seng gained 1.9 per cent. Singapore’s Straits Times rose 1.47 per cent. The Shanghai Composite was up 0.94 per cent and Tokyo’s Nikkei-225 was up 0.89 per cent. US index futures also pointed towards a positive opening.

Aneesh Shrivastava, chief investment officer, IDBI Fortis Life Insurance, said, “There are still enough buying opportunities for insurance companies that are looking at value unlocking over a medium to long term. On FY11 numbers, the market is expensive, but if you look at FY12 and assume a 20 per cent growth, then we are trading at 15.5 times, which is reasonable.”

Index heavyweight Reliance Industries Ltd, which has been the worst underperformer, rose 3.58 per cent to close at Rs 992 on the BSE. Banking major SBI rose 5.52 per cent to touch a lifetime high at Rs 3,147. HDFC Bank was up 5.32 per cent at Rs 664. Reliance Infrastructure rose 4.47 per cent at Rs 1,055 and ICICI Bank gained 4.43 per cent to close at Rs 1,097 on the BSE. Among others, DLF, NTPC, Jaiprakash Associates rose over 2 per cent.

The BSE Mid-cap and Small-cap indexes gained 0.77 and 0.22 per cent, respectively. BSE Bankex was the top gainer among sectoral indices, up 3.62 per cent. BSE Oil &Gas was up 2.57 per cent. BSE Realty gained 2.46 per cent and BSE Metal was up 1.59 per cent.

Market breadth showed 48.95 per cent, or 1,150 stocks, today rose against declines by 46.97 per cent, or 1,449 stocks. So far this year, foreign institutions have bought shares worth over $13.5 billion, in addition to last year's record $17.5 billion.