Sebi steps in to lift Sensex

Frayed nerves in the markets cooled down after Securities and Exchange Board of India (Sebi) Chairman GN Bajpai went on television channels to clarify that the proposed transaction tax would not be applicable from yesterday.

"It will be applied only after the Finance Bill is passed," he said, adding that brokers could represent their case to the finance minister on Tuesday, when Chidambaram would be in Mumbai.

Institution and fund buying helped the market close firmly in positive territory on Friday, recovering almost all of Thursday's losses.

The Bombay Stock Exchange (BSE) Sensex fell to an intra-day low of 4,723.04 in early morning trades before recovering to a high of 4,954.86 in the post-Bajpai trading. The Sensex closed at 4,945.48, up 2.10 per cent (101.64 points) from Thursday's close.

The proposed transaction tax on equities had singed the markets in the opening session, with the Sensex opening almost 80 points lower.

Volumes were extremely low as traders stayed away from the trading terminals, and on the street outside, protesting against the tax.

Gainers outpaced losers 2:1 on the BSE and 26 of the 30 scrips in the Sensex basket closed higher.

Volumes were extremely low on Friday after Thursday's high volume and high volatility carnage in the market. Turnover in the cash segment fell to Rs 1,340.85 crore yesterday (Rs 2,817.48 crore on Thursday) on the BSE and Rs 3,497.21 crore (Rs 6,472.80 crore) on the National Stock Exchange (NSE).

Incidentally, foreign institutional investors were net buyers of Indian shares worth Rs 147.60 crore on Thursday, and domestic mutual funds also turned net buyers at Rs 77.60 crore, for the first time in July.

Deepak Chhabria, chief operating officer, institutional equity, IL&FS Investmart, said, "For long-term investors, the transaction tax was not a concern and therefore, institutions and funds were buyers." He added that this tax was more of a hindrance to short-term players.

Brokers said volumes fell as participants stayed away, ironically protesting against the tax that they fear would dry up volumes and increase transaction costs.

Pankaj Shah, managing director, Strategic Capital Venture, said, "most FIIs are positive on the elimination of long-term capital gains, and a reduction in the short-term capital gains tax rate in a Budget, which they feel is foreign investor-friendly."

FMCG heavyweight ITC was the largest gainer in the Sensex basket, closing 8.19 per cent higher at Rs 1,057.25, followed by Bharti Tele-Ventures, rising 6.43 per cent to Rs 158.10 and Maruti Udyog gained 6.33 per cent to Rs 428.10.

The four losers in the Sensex basket, HPCL fell 5.97 per cent to Rs 288.90, Hindalco fell 1.7 per cent to Rs 1079.20, HLL was down 1.45 per cent to Rs 122.40 and Wipro fell 0.23 per cent to Rs 499.85.

Tractor majors continued with the upward climb, with Mahindra and Mahindra up 1.91 per cent to Rs 510.70, and Punjab Tractors was up 3.48 per cent to Rs 229.05.

Auto majors Tata Motors gained 5.78 per cent to Rs 415.60 and Hero Honda Motors was up 1.76 per cent to Rs 500.50. Steel major Tata Steel gained 3.48 per cent to Rs 306.65.

ONGC gained 3.49 per cent to Rs 670.60, MTNL was up 3.36 per cent to Rs 133.95 and BHEL gained 2.6 per cent to Rs 535.80. Heavyweight State Bank of India scrip was up 2.65 per cent to Rs 429.40 and Reliance Industries was up 1.46 per cent to Rs 438.55.

Infosys technologies gained 2.30 per cent to Rs 1,382.60. Dr Reddy's Labs gained 2.33 per cent to Rs 762.95 and Gujarat Ambuja Cements was up 2.81 per cent to Rs 281.85.

The BSE capital goods sector index was the biggest gainer yesterday, up 3.54 per cent, followed by the FMCG index, up 2.63 per cent and the BSE PSU index gained 2.08 per cent. The BSE Bankex index was up 1.91 per cent and the TECk index was up 1.75 per cent.