Sensex stages relief rally, ends 341 pts up

Domestic financial institutions, value buying at lower levels pull market.

After three days of free fall, the BSE Sensex on Tuesday staged a 341-point recovery. Though the trading session was choppy in the morning, strong value buying led to a smart bull rally across the market in the post noon session.

Margin pressure on brokers eased and open interest positions came down drastically after Monday's heavy selling. With this, it is anticipated that the rollover of futures and options (F&O) on Thursday would not be as crucial as it was projected to be earlier.

"Margin pressures have eased. With the markets rising, money would come back to the brokers and they would go for some long positions," said Rajesh Jain, director and CEO, Pranav Securities.

Trading on Tuesday started on a positive note as the Sensex opened at 10,590.67, up 109 points from Monday's close of 10,481.77. The S&P CNX Nifty on Tuesday gained 3.83 per cent (118 points) to 3,199.35 from Monday's close of 3,081.35.

Investors' wealth on Tuesday appreciated by Rs 1,03,790 crore. Since May 11, when the Sensex reached its peak, over Rs 6,00,400 crore worth of market capitalisation had been wiped out till yesterday, when the market witnessed a historic fall.

"The recent fall was more due to technical reasons as fundamentally nothing has changed," said Jayant Manglik, vice-president, RR Equity Brokers.

Foreign institutional investors (FIIs) remained net sellers in the market on Tuesday but are understood to have selectively bought blue-chip stocks that have taken a tumble in the last few trading sessions.

Domestic mutual funds and Life Insurance Corporation were buyers in the market. Data from the stock exchanges indicate that FIIs have sold equity worth Rs 1,132 crore on Tuesday.

In a volatile day, the Sensex swung 439.90 points in early trade between a low of 10,185.48 and a high of 10,625.38. The 30-stock benchmark index recovered from its low of 10,185 to close up 637.30 points at the end.

The overall market breadth was good, compared with the past few sessions, with the Sensex having an advance-decline ratio of 9:1 while the overall market saw 1,424 scrips advancing and 985 scrips declining.

Global markets, especially emerging Asian markets, also witnessed volatile trading. While the Jakarta Composite, the KLSE Composite and the Hang Seng Index closed in the green on Tuesday, Shanghai, Seoul and Taiwan markets closed in the red. The market rally was helped by all sector indices.

However, the standout sector index was the metal index, which gained 7.35 per cent followed by the BSE consumer durables, which gained 4.95 per cent. The Metal Index has been the major laggards over the last few trading sessions, losing around 18.17 per cent since May 16.

"The US GDP data is eagerly anticipated and any good numbers would lead to outflows from the commodity indices into equities," said Giri Saladi of Angel Broking. He pointed out that strikes in mines in Chile and Peru was keeping spirits high in the metals index.

Steel stocks also rallied late after China's largest steel company said that it might hike prices.

Despite a gain of over 300 points, 390 stocks were frozen at lower limit of the circuit breaker.