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The markets posted their highest single-day gain in about four months, as investors rushed to buy beaten-down stocks after benchmark indices fell to lows seen in October 2014, following a two-day correction.
Most global markets also ended with gains, as investor risk appetite improved and stability returned to the bond market. In China, clamour for economic stimulus to avert a slowdown grew.
The BSE Sensex closed at 27,105.39 on Friday, up 506 points, or 1.9 per cent, the most since January 15. The 50-share National Stock Exchange rose 134 points, or 1.67 per cent, to 8,191.5. Both the indices ended positive for the week, ending their three-week losing streak.
“Markets have been volatile because of the liquidity adjustment globally. We believe it will stay like this for some more time,” said Pankaj Pandey, head of research, ICICI Direct.
A rise in sovereign bond yields in developed markets such as the US and Europe led to turmoil in financial markets, as it sparked a sell-off in risky assets.
Even as the market charted a recovery, foreign investors continued to take out money, though the selling subsided. Provisional data showed foreign institutional investors (FIIs) sold shares worth Rs 438 crore, adding to their previous 10-day selling tally of Rs 12,000 crore.
The Indian market has failed to sustain the outperformance seen last year. A slow economic recovery, subdued earnings by companies and concern over retrospective taxation has seen the markets erase their gains, turning into one of the worst-performing global markets.
“Markets had been in the oversold region and so, the subsequent rebound we saw was expected. Things have not changed on the ground. The weakness is due to withdrawal by FIIs, which we believe could continue for some more time,” said Deven Choksey, managing director, KR Choskey Associates.
The gains seen on Friday were across the board, with more than two stocks gaining for every declining stock. Among blue-chip stocks, Hindustan Unilever gained the most in two weeks, following its earnings for the March quarter exceeding expectations. Among other gainers were Tata Motors (five per cent), ICICI Bank (four per cent) and Cipla (four per cent).
Though the markets had come off about 10 per cent from their highs, the outlook remained hazy, experts said. They add market will eye the government’s ability to push ahead key legislation such as the constitutional amendment Bill for a goods and services tax (GST) and the land acquisition Bill. The market is also hoping for a speedy resolution to the FII tax issue, for which the government has set up an expert group.
“A potential stalemate on the GST and land acquisition Bills could dampen market sentiment. If these Bills, particularly the one on GST, is passed by Parliament next week, there could be some optimism in the market,” said Choksey.
