The markets rebounded in style after several false starts through the course of the one-month long sell-off, that shaved off more than 10% from the benchmark indices, and threatening to come back in the previous session. The bulls finally managed to loosen the stranglehold of the bears to catapult the Sensex higher by 358 points or 2% at 18449 and the Nifty up 94 points at 5526. The midcap index ended at 6827, higher by 73 points and the smallcap index ended at 8462, up 101 points. Realty, metals and banking stocks led from the front.
The day began on a tentative note after the volatility witnessed in the last hour of Wednesday's session, but the absence of any follow-up selling this morning led to the return of confidence among the market participants. In the process, the markets shrugged off data showing an acceleration in food inflation. Food inflation jumped to 17.05% for the week ended 22 January 2011, its highest level since 25 December 2010, compared to 15.57% in the previous week. The fuel price index climbed 11.61%, higher that previous week's 10.87% rise. And the primary articles index for the week ended 22 January 2011 rose to 18.44% from previous week's 17.26% rise. Only time will, however, tell whether the day's rally is sustainable, given that we are in the midst of a downtrend.
There was some good news on the macro-economic front, though. The business activity in the services sector grew at a faster clip in January than in the previous month, boosted by new orders and expectations of solid growth. The HSBC Market Business Activity Index, based on a survey of around 400 companies, rose to 58.1 in January after falling to 57.7 in December from November's four-month high. The key index of the service sector has now been above the 50 mark, that separates growth from contraction, for the 21st consecutive month .
And Finance Minister Pranab Mukherjee sought to assure the investors that a growth of 8.5% was on track for the current financial year ending March 2011. Manufacturing activity is on a strong growth path in spite of the monthly fluctuations in the Index of Industrial Production witnessed in recent months and the fiscal deficit will be lower than the government's earlier projection of 5.5% for this year, Mukherjee added.
On the global front, most Asian markets were shut on account of the Chinese Lunar New Year holidays. Japan's Nikkei slipped 0.25% after sluggish overnight leads from Wall Street and renewed violence in Egypt. There have been violent clashes between pro- and anti-government demonstrators on Wednesday on the growing clamour for the immediate resignation of President Hosni Mubarak. The US stocks had struggled overnight to end virtually unchanged.
DLF soared by 7.4% at Rs 243 to top the gainers list on the BSE for the second consecutive day. Among the other realty stocks, Jaiprakash Associates gained 6% at Rs 85, HDIL gained 6.3% at Rs 139 and Indiabulls Real Estate added 4.3% at Rs 1251. Most metal stocks rose after copper neared the $10,000 mark. Hindalco jumped by 4.6% at Rs 245, Sail added 2.6% at Rs 164 and Tata Steel added 1.8% at Rs 637. And in the banking space, SBI strengthened by 3% at Rs 2652, ICICI Bank gained 2.1% at Rs 1030 and HDFC added 2.1% at Rs 2060. RIL extended its previous day's gains by adding another 2.4% at Rs 943. And ditto with Bharti Airtel, which added 5.1% at Rs 339 to make it nearly 8% of gains in two days.
Bajaj Auto was the sole loser on the BSE, shedding 0.5% at Rs 1211.
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The market breadth was positive. Out of 2984 stocks traded on the BSE, there were 1763 advancing stocks as against 1037 declines.