A massive bout of short-covering by foreign institutional investors (FIIs), mainly hedge funds, on Friday saw Indian markets surging the most in two months as regulators in the US, the UK and Australia took steps to curb bets that stock prices of banks and brokerages will fall, easing concern that the crisis in the financial markets will worsen.
Key indices saw a dramatic rally on Friday as regulators in the US banned short selling in stocks of financial companies. The benchmark index of the London Stock Exchange, FTSE 100, rose by as much as 9 per cent while other indices in Europe such as Germany’s DAX (up 5.43 per cent) and France’s CAC 40 (up 8.27 per cent ) surged similarly.
In Asia, the Shanghai Composite, Hang Seng and Nikkei 225 saw stunning rallies. Russia's rouble-denominated Micex index jumped 25 per cent after the markets were halted for trading for the past three days.
Both the Russian and Chinese indices rose the most in at least two decades. The UK and Australia have banned short selling of financial sector stocks since.
There were no losers among the top 30 index stocks on Friday. The market breadth also improved with 1,888 stocks on the advancing side to 740 stocks on the declining side. The short covering rally was led by the realty stocks, which bounced back strongly. The BSE Realty index jumped 7.59 per cent or 289.53 points.
| TOP GAINERS | ||
| (Share price in Rs) | Sept 19 | % chg* |
| Satyam Comp. | 370.10 | 10.48 |
| ICICI Bank | 628.10 | 9.07 |
| HDFC | 2308.45 | 8.32 |
| Tata Power | 1027.30 | 8.30 |
| DLF | 426.90 | 7.78 |
| ONGC | 1072.10 | 7.30 |
| Infosys Tech | 1623.85 | 6.59 |
| TCS | 766.00 | 6.37 |
| HDFC Bank | 1299.20 | 6.32 |
| BHEL | 1710.70 | 6.31 |
| * over previous close | ||
“Yesterday’s market rally was driven by global developments as indices worldwide rose dramatically. The rally may continue but there could be some consolidation in the market at these levels. Inflation has also softened this week over last week. Valuation-wise, stocks had begun to look attractive when the index touched the 12,500 level,” said Jignesh Shah, head of equities at ABN AMRO bank.
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FIIs bought equities worth Rs 1,016 crore while domestic institutional investors bought equities worth Rs 44 crore, according to provisional data from the BSE. Chartists and fund managers expect the market to find “reasonably” good support at 13,000 levels.
“We think 13,000 will be a good bottom for the Sensex because the index has tried to sell off below that mark three times, without much success — once in mid-July, when the RBI hiked rates, second, as crude oil prices were increasing and finally this week,” said a fund manager with a foreign fund house, requesting anonymity because of compliance issues.