Markets rally on short-covering

Short covering by investors helped the benchmark Sensex to end with gains on Friday after falling for the past six days. The shares of index heavyweight Reliance Industries led the rally.

The Sensex gained 326.55 points, or 1.8 per cent, to 18,852.87 on Friday after falling 7 per cent over six days. Twenty two of the 30 index stocks advanced. The Sensex has slid 4.3 per cent this week. The S&P/CNX Nifty rose 89.25 points, or 1.6 per cent, to 5,608.60.

The top gainers in the Sensex pack included Reliance Energy, up 7.48 per cent at Rs 1,725.10, DLF up 5.58 per cent at Rs 868.65, HDFC up 4.12 per cent at Rs 2,666.30 and L&T up 4.02 per cent at Rs 4,100. Reliance Industries, which has the highest weightage on the Sensex, rose by 3.03 per cent to Rs 2,811.45.

The foreign institutional investors (FIIs) remained sellers in the cash market, registering net sales of Rs 500-odd crore on Friday.

This brings the FII net sales figures in November to over Rs 12,200 crore, according to the BSE data.

Reliance Natural Resources rose sharply by 6.75 per cent to Rs 158.20 after correcting significantly in the last couple of days.

Market players said that huge short positions had been build up on the counter after its recent rise. The stock had seen a sharp run-up in the past couple of months to touch a life time high of Rs 203, from a 52-week low of Rs 20.80 registered on December 13 last year.

The mid and small-cap stocks too witnessed buying interest. The BSE Mid-cap index was up by 1.70 per cent, while the Small-cap index gained 1.10 per cent.

Arpit Agarwal, head of research at Arihant Capital expects the markets to remain subdued. "The markets may remain choppy ahead of the F&O expiry next week. Moreover, most of the foreign funds who had borrowed in yen are likely to sell due to the appreciating yen," he said.

India's wholesale price index rose 3.01 per cent in 12 months upto 10 November, below the previous week's rise of 3.11 per cent, according to government data released on Friday. The annual inflation rate was 5.39 per cent in the corresponding week of the previous year.

The market breadth was strong, as 61.93 per cent or 1,760 stocks advanced against declines of 36.38 percent or 1034 stocks.

The Asian indices closed the day on a mixed note. Hang Seng was the top gainer up 2.06 per cent. Shanghai Composite gained 0.96 per cent. Straight Times, however, declined to 1.85 per cent.