But a correction could be imminent, say market players.
Signs of improvement in the global economy saw domestic stock markets record the biggest single-day rally in six months, even as market players warned against over-exuberance.
After a two-day holiday last week, the Bombay Stock Exchange (BSE) Sensex jumped 731 points, or 6.41 per cent, to close at 12,134 points, the highest level since October 3, 2008. The broader 50-share S&P CNX Nifty of the National Stock Exchange (NSE) rose 180 points, or 5.18 per cent, to 3,654.
The Indian market rose the most among markets in Asia. Traders said markets around the world rose in anticipation of improvements in the global economy and on signs of recovery.
US consumer sentiment rose in April 2009, according to a survey released on Friday. Besides, data showed that the pace of decline in the US manufacturing sector slowed in April 2009. The closely-watched ISM purchasing managers’ index rose to 40.1 per cent in April 2009 from 36.3 per cent in March 2009, the highest reading since September 2008, when the global financial crisis intensified with the collapse of investment bank Lehman Brothers.
| TOP GAINERS | ||
| Price (Rs) | % Chg* | |
| Sterlite Ind | 476.80 | 16.56 |
| Hindalco | 61.25 | 13.74 |
| M&M | 549.80 | 13.07 |
| HDFC | 1957.60 | 13.06 |
| ICICI Bank | 529.05 | 10.74 |
| Tata Steel | 263.00 | 10.48 |
| Wipro | 364.60 | 10.32 |
| ITC | 205.65 | 8.75 |
| HDFC Bank | 1194.70 | 8.54 |
| Larsen & Toubro | 952.40 | 8.28 |
Investor confidence also revived over the weekend after the Association of South East Asian Nations (Asean), together with Japan, China and South Korea, said it will start a $120 billion foreign-currency reserve pool by the end of the year.
More From This Section
With global economic indicators improving, foreign institutional investors (FIIs) are showing signs of returning to the Indian markets. According to data on the Securities and Exchange Board of India website, FIIs were net buyers of shares worth Rs 344.50 crore last Wednesday. In April, shares bought by foreign funds were worth over Rs 7,000 crore, their biggest one-month purchase in over a year.
Market players, however, suggest a correction could be imminent. “The October 2008 lows hit by stock markets around the world may be history now as markets have stabilised.
However, we may be currently on the last leg of rally and a correction is expected soon,” said Amitabh Chakraborty, president of equity at Religare Enterprise.
Chakraborty added that the election results are a near-term uncertainty and the postponement of the US stress tests results was another development that needed to be factored in.
| WORLD MARKETS | |
| % chg* | |
| Hang Seng | 5.54 |
| Shanghai Composite | 3.32 |
| DAX | 2.79 |
| CAC 40 | 2.47 |
| Dow Jones# | 2.03 |
| * over previous close # at 12:30 am (IST) | |
“There is a strong possibility of profit booking because this kind of exuberance is often followed by a correction,” said Vimal Bhandari, country head, Aegon NV.
In the domestic market the BSE Metal index was the biggest gainer, rising 8.77 per cent on news that the Chinese manufacturing sector expanded for the first time in nine months. As a result, Sterlite, Industries rose 16.56 per cent to Rs 476, the biggest Sensex gainer.
The BSE IT index was up 8.40 per cent and BSE Bankex gained 7.89 per cent. Mahindra & Mahindra rose 13 per cent at Rs 549, HDFC, which announced its fourth quarter results, gained 13 percent at Rs 1,957. Index heavyweight Reliance Industries rose 4.58 per cent at Rs 1,885.
In the broader section, advances led losers in the ratio of 3:1 on relatively high volumes of 202 million shares.