Indian stock markets today continued their surge back to higher levels due to short covering and bullish global markets. The benchmark indices, the Sensex of the Bombay Stock Exchange (BSE) and the S&P CNX Nifty of the National Stock Exchange, rose substantially after European markets opened on a positive note.
The Sensex gained 278.5 points, or 1.7 per cent, to close at 16,666; the Nifty was up 85.7 points, or 1.74 per cent, at 5,003. This was the second day of rise, mainly supported by spurts in the share price of Reliance Industries, Reliance Communication, Tata Motors, Sterlite Industries, State Bank of India and HDFC Bank. These stocks rose between two and five per cent.
“The markets have turned. Short covering is happening in Reliance stocks, mainly by domestic players. Major long positions were unwound in the past week, as markets were on a crash course. However, foreign funds were caught on the wrong foot as index heavyweight Reliance Industries was witnessing sharp price movements, which are moving the Sensex,” said Kishor Oswal, managing director of Mumbai-based CNI Research.
“The markets are oversold and there will be short-term bullishness. Oil and gas and energy stocks are participating in the rally this time. While the markets will remain up next week too, volatility may remain high. There will be stock-specific action and markets could fall sharply if there is more bad news,” said R L Narayanan, vice-president of equities and institutional business at Bonanza Portfolio.
The share price of Reliance Industries, which has a weight of over 15 per cent in the Sensex, has risen Rs 45 in the past couple of days. The stock rose Rs 14.50, or 1.44 per cent, to close at Rs 1,021 on the BSE.
The market breadth was strong, as 58 per cent, or 1,663 stocks, rose and 38.4 per cent, or 1,107, fell. On Wednesday, too, crude oil prices had jumped four per cent, the biggest one-day rise in over three months. This was after data from the Energy Information Administration showed increases in US demand for refined oil products like petrol and diesel.
FIIs have sold shares worth $2.3 billion (Rs 10,940 crore) in May so far, their biggest pullout since October 2008. This selloff was due to the deteriorating fiscal conditions in Europe, triggering flight to safety from risky assets to the dollar. Provisional data from BSE suggested FIIs were net sellers to the tune of Rs 533 crore, while domestic institutions bought shares worth Rs 410 crore in the cash segment today. The benchmark Sensex is down by more than six per cent so far this month, but has performed better than the broader MSCI’s measure of Asian shares, other than that of Japan.
Among the European markets, the UK’s equity benchmark FTSE index was up 2 per cent. German DAX gained 2.4 per cent and the CAC 40 of France was up 2.2 per cent today. In Asia, China’s Shanghai Composite rose 1.15 per cent. Japan’s Nikkei 225 gained 1.2 per cent. Straits Times of Singapore was up 1.6 per cent and Taiwan Weighted rose 1.06 per cent.
Thursday also saw the expiry of the May contracts in the futures and options (F&O) segment. According to derivative analysts, the rollovers in Nifty stood at 66 per cent while that of stock futures was pegged at 74 per cent, which is in line with previous rollovers. The Nifty June futures contract closed at 4,987.90, with the discount widening to 15.20 points compared to the previous day’s discount of 13.25 points. The India VIX - volatility index - also fell nearly 10 per cent to close at 29 on Thursday.