Rupee reverses downward trend, gains 30 paise.
The stock markets rallied on Monday, as investor confidence received a boost from the government’s move to initiate reforms and on hopes the euro zone debt crisis would be tackled with definite measures.
The Bombay Stock Exchange benchmark Sensex posted its biggest single-day gain in three months. Traders said investors rushed to cover short positions in financial and export-driven software services stocks, which had been beaten down during the four-week market slide.
However, on Monday’s rally did not enthuse market experts much. A key indication to this is the fact that share prices rose on extremely thin volumes. “Globally, the rally in stocks is mainly due to nearing of derivatives expiry. Those who held short positions were covering it at the end of the month. The GDP numbers, to be out in a couple of days, are expected to be around 6.25 per cent. This would further hit market sentiment and pull markets further down,” said Kishor Ostwal, chairman and managing director of CNI Global Research.
The rupee also reversed its downward trend, tracking strong performance of the domestic equity market and rally in the euro against the dollar. The rupee gained 30 paise or 0.5 per cent to close at 51.96 against the dollar on Monday, compared to Friday’s close of 52.25.
The dollar-rupee pair has closed below the mark of 52 after six trading days. Also, this was the biggest percentage rise in the past one month.
The steps taken by the Reserve Bank of India (RBI) last week to attract dollar flows seem to have helped soothe market sentiments. “This correction in dollar-rupee pair is expected till the 51.60 levels,” said India Forex Advisors in a report. However, this was a short term rally and the outlook for rupee remained weak, it added.
Meanwhile, the Sensex rose 3 per cent, or 471.7 points, to close at 16,167.13, with all but two of its components closing higher. The index has lost 21 per cent so far since the beginning of 2011. The broader index S&P CNX Nifty of the National Stock Exchange (NSE) rose 141 points, or 3 per cent, to 4,851.
There was a renewed hope among investors that the euro zone leaders would come up with concrete steps this week to activate a crucial bailout fund. The markets also rose on reports that the International Monetary Fund (IMF) was considering extending a helping hand to the debt-ridden Italy. The report, however, was later denied by IMF officials.
The MSCI world equity index gained 0.9 per cent, rising for the first time after 10 consecutive days of losses. In Europe, the STOXX 50 index rose 0.73 per cent, DAX rose 0.57 per cent and FTSE index was up 0.36 per cent. In Asia, the Hang Seng gained 1.97 per cent. Nikkei was up 1.56 per cent and Shanghai Composite ended flat, gaining 0.01 per cent.
