No bullstops for Sensex

The government's decision to allow provident funds to invest 5 per cent of their annual accruals in the equity market sparked aggressive stock buying on Monday.

News that the government may allow foreign oil companies to pick up stakes in domestic oil majors boosted oil scrips. Overall, the sentiment was bullish, with brokers expecting the government to move into pre-Budget gear.

Brokers reasoned that the PF move would add to liquidity in the domestic markets, and this led to value buying in shares that had been battered in the last few weeks. The benchmark Sensex ended with gains for the fourth straight day on Monday.

Foreign institutional investors (FIIs) were net buyers to the extent of Rs 630 crore on Friday, according to latest data released by the Securities and Exchange Board of India.

Brokers said buying interest was spread across the board, including in shares in the power, banking, PSU, pharmaceutical, technology and metal sectors. The Sensex gained 2.13 per cent (136.85 points) on Monday, to close at 6,555.94.

The Sensex has thus gained 450 points in the last four trading sessions, and the broad markets have recovered Rs 1,10,000 crore in capitalisation.

Amitabh Chakravorty, head of research at Kotak Securities, said: "Optimism is back in the markets, as corporate results have been robust. In the short term, we might see some volatility after a sharp rally in the last two days."

Among the index stocks, Reliance Energy was the biggest gainer, up 6.16 per cent to close at Rs 550.55, followed by Bharti Tele-Ventures, which gained 4.66 per cent to Rs 230.35, and the HDFC Bank scrip was up 4.63 per cent to Rs 564.40.

Among oil stocks, the HPCL scrip up 3.79 per cent to Rs 363 and ONGC up 2.68 per cent to Rs 818.90. The Indian Oil scrip was up 2.69 per cent to Rs 545.50 on sustained buying despite disappointing December quarter results.

The head of equity desk at a domestic broking firm said, "The rally in the past two days has been largely liquidity driven and due to informed buying in index stocks."

The breadth of the market was positive, with gainers outpacing losers 4:3. In the 30-scrip Sensex basket, 27 scrips closed with gains.

"A smooth roll-over of derivatives contracts and aggressive buying by new foreingn institutional investors has resulted in a sharp rally in the last two days. Also few hedge funds have covered their short positions. The stort term trend in the market is positive with intermediate corrections," said an equity dealer.

The MTNL scrip was down 4.63 per cent to Rs 142.10 after the company's board decided not to issue bonus shares as announced earlier, while ITC ended 2.77 per cent lower to Rs 1361.85.