Sensex up 380 points on select buying

Short covering and value buying by funds buoyed the stock market on Friday and took the Sensex to its second-highest intra-day rise.

The markets opened on a shaky note, but selective buying helped save the day.

The Sensex clocked intra-day gains of 466 points after touching its lowest point at 10,011 during the day. The 30-stock benchmark index ended at 10,451, a gain of 380 points. The Nifty traded largely in the green on Friday and closed with a gain of 4.36 per cent, or 129 points, at 3,091.35.

Despite these positive moves, concerns about thin volumes continued to haunt the market. The BSE reported a total turnover of Rs 3,498 crore.

At the NSE, the total traded value was Rs 7,394 crore. The market breadth was also negative on Friday.

On the NSE, only 255 shares advanced, against 640 scrips declining. Foreign institutional investors were net buyers on Friday, after weeks of consistent outflows. The NSE reported net purchases of Rs 621.2 crore by FIIs for yesterday.

Other Asian markets also closed the week on a positive note. All major Asian composites, other than Shanghai, gained between 1 and 2 per cent on Friday.

The Shanghai composite went down by 0.88 per cent. With the mauling that the markets witnessed in the last three weeks of trade, investors "" institutional and retail "" are buying only frontline blue-chip stocks.

Brokers say that with every small rise in prices, investors are booking profits or minimising losses and exiting mid cap and small cap stocks.

"Midcaps would be under pressure for a couple of days. Investors need to be clear about why they bought the stock. If they believe the fundamentals of the company and bought it, it's different. But most bought midcaps since there was a lot of momentum on these. They are cashing out now," said Rahul Rege, senior vice-president, SSKI.

Fund managers see a lot of value buying coming in at these levels, despite poor sentiment. "The levels in the market right now are very comfortable. I would recommend investors to buy now," said A K Sridhar, chief investment officer, UTI AMC.

On Thursday, markets were negatively affected by reports that Japanese investors were selling heavily. A Japanese broking house put out a fair value of 7,000 on the Sensex.

"Japanese investors are buying stocks in India now. The Sensex level of 7,000 was a brokerage side analysts' view; markets should not be spooked by this," said Rege.

With the Indian markets still looking at global parameters for taking cues, analysts are reluctant to predict whether the bottom of the market has been seen or not.

Though optimism about corporate earnings, GDP growth and good monsoons continues, there are concerns that the increase in interest rates in the US and Japan would have a debilitating effect on liquidity flowing into the Indian markets.

Though retail investors are still shaking from the big sell-off witnessed in the last three weeks, brokerage firms say they are giving out "buy" suggestions.

"We are telling our customers to remain invested. In fact, these are good levels to buy at. Investors are taking our recommendations with a pinch of salt; it is not easy to come back to the markets if you have suffered losses," Rege said.