Indian markets now 18 karat

Sensex rallies over 1,000 points from day's low.

The Sensex zipped past the 18,000-mark on Tuesday and rose 788.85 points, or 4.51 per cent, after the United Progressive Alliance (UPA) and the Left postponed their political showdown over the Indo-US civil nuclear deal and foreign institutional investors (FIIs) rushed to buy stocks.

Short covering by trapped bears, who went short anticipating political problems, also pulled up the market significantly.

In the process, the Sensex registered its biggest single-day surge in absolute terms and created history by closing at a new high of 18,327.

The market was lying low in the morning as political uncertainty loomed large ahead of the Left-UPA talks. Within an hour of trading, however, the announcement that talks had been postponed to October 22 saw the Sensex shoot up over 1,000 points from the day's low of 17,287 as investors rushed to cover their short positions and FIIs struck new buy orders. The broad-based Nifty too rose 242 points, or 4.76 per cent, to touch 5,327.

Reliance Industries contributed almost 300 points to the rally on speculation that the company may go for a stock split. RCom, L&T, Infosys and Reliance Energy were the other major contributors. Telecom stocks also went up after Citigroup upgraded the sector ahead of the second quarter (Q2) results.
 

Top 5 gains by points
Date	Previous close	Close	Change	% change
09-Oct-07	17491.39	18280.24	788.85	4.51
19-Sep-07	15669.12	16322.75	653.63	4.17
15-Jun-06	8929.44	9545.06	615.62	6.89
03-Oct-07	17328.62	17847.04	518.42	2.99
09-Jun-06	9295.81	9810.46	514.65	5.54
Top contributors from 17k to 18k
	Price in Rs		% change	Points  contributed
	27/09/2007	09/10/2007
Reliance Ind	2320.20	2600.45	12.08	299.85
Reliance Comm	582.80	705.85	21.11	134.35
Larsen & Toubro	2837.05	3163.20	11.50	127.58
Reliance Energy	1117.25	1533.65	37.27	101.19
Infosys Techno	1911.75	2048.00	7.13	100.72

It took just eight trading sessions for the Sensex to reach 18,000 from 17,000. The journey from 16,000 to 17,000 was shorter at six trading sessions.

FIIs on Tuesday invested over $350 million in the secondary market. The total net investment in the cash market in October is $1.8 billion.

Commenting on Tuesday's rally, Hemendra Kothari, chairman, DSP Merrill Lynch, said: "It is now prudent to adopt a wait-and-watch approach since there is a huge fund inflow in emerging markets, especially the BRIC (Brazil-Russia-India-China) countries."

Added Manish Sonthalia, vice-president (equity strategy), Motilal Oswal: "We are trading in a dangerous zone. Valuations don't justify the current level but the momentum led by foreign money is pulling the market up."

Meanwhile, Bloomberg reports that equity markets in seven other Asian countries also rose to records. The Morgan Stanley Capital International Asia-Pacific Index gained 0.5 per cent to 166.69 as of 8:02 p.m. in Tokyo, surpassing the previous all-time high close of 166.41 on October 3.

Also read:-

Valuations see marginal rise

Reliance powers Sensex

Bears trapped

Disconnect between politics, economy: Sebi

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