Volatile Sensex sniffs at 18K

Gains 500 pts in last hour of trading to close 518 pts up.

Egged on by inflows from foreign institutional investors (FIIs), the Sensex galloped towards the 18,000-mark on a day that saw huge volatility after heavy selling by foreign investors in the Hong Kong market.

The 30-stock index touched an intra-day high of 17,953.07 points, 47 points away from the 18,000-mark.

The market breadth was positive with 57 per cent of the stocks in the green in morning trade but the breadth declined with 39 per cent of the total stocks in the green. The broad-based Nifty-50 closed at 5,210.8 points, up 2.8 per cent.

The Sensex came sharply off higher levels, shedding over 600 points from the day's high in mid-session with the Sensex plunging to 17,288.41 points, spooked by a dip in the Hang Seng. 

The Hang Seng slid 719.81 points, or 2.6 per cent, to 27,479.94, from its record close of 28,199.75 yesterday on speculation that a surge to a record high has overvalued companies' earnings prospects.

TOP 10 SENSEX JUMPS
Date	Sensex	Net Change*	% Change*
19/09/2007	16322.75	653.63	4.17
15/06/2006	9545.06	615.62	6.89
03/10/2007	17847.04	518.42	2.99
09/06/2006	9810.46	514.65	5.54
08/03/2007	13049.35	469.60	3.73
30/06/2006	10609.25	447.09	4.40
24/03/1992	3669.58	426.05	13.14
12/01/2007	14056.53	425.82	3.12
27/08/2007	14842.38	417.51	2.89
02/06/2006	10451.33	379.91	3.77
* over previous close

News that China may prevent foreign investors from taking control of domestic brokerages further dampened the sentiment in Asian markets as FIIs pulled out of the Hang Seng-listed Chinese companies.

Since FIIs sold, some big bull operators liquidated huge long positions. Domestic institutions including mutual funds and insurance companies have also booked profits.

Domestic institutions were net sellers to the tune of Rs 221.73 crore today. The day turned out to be a nightmare for day traders as they covered long positions in a falling market which actually recovered later.

Thereafter, Indian markets staged a recovery, as buying interest picked up at major counters including Reliance Energy (up 7.48 per cent or Rs 1,450.40 a share), Infosys Technologies (up 5.72 per cent or Rs 2,001.40 a share ) and NTPC (up 5.34 per cent or Rs 217 a share).

In the last few hours of trading, the Sensex gained nearly 500 points, ending the day at 17,847.04 points, up 2.99 per cent or 518.42 points.

FIIs were net buyers today, buying to the extent of Rs 2,662.06 crore in Wednesday's trading session. Overall, FIIs bought over Rs 4,000 crore in two trading sessions in October.

Market participants contend that the rally has been breathtaking and there is bound to be some profit booking at these levels. A surfeit of liquidity in the markets has led to the recovery, say some market participants. Most market participants are advocating caution.

"The uptrend in the Indian markets has been accelerated after the Fed rate cut. International investors have been on the rampage as is evident from the large FII numbers. However, the rise has been too fast," said Paras Adenwala, chief investment officer, ING Investment Management.

Meanwhile, the US markets opened weak with the Dow Jones down 27.15 points (down 0.19 per cent) and S&P 500 down 3.53 points on Wednesday.