Markets recover on Chinese balm

After a two-day slump, Indian markets recovered on Wednesday, mirroring the rise in global markets on the back of the announcement of stimulus in China and hope that the US would delay raising rates.

While the BSE Sensex gained 138 points, or 0.5 per cent, to close at 26,631, the National Stock Exchange Nifty ended 43 points higher at 7,975. However, the trading session was choppy, signalling nervousness on the part of investors ahead of the release of a policy statement after a meeting of the US Federal Reserve on Wednesday.

"The market is likely to remain volatile for some more time. There is some short build-up in the system, as hedging activity is picking up ahead of the uncertainty," said Nikhil Golani, head (institutional equity), Tata Securities.

Analysts said the short build-up had picked up in the last two days. Many are keeping an eye on the US Fed meeting for hints to its stance on timing interest rate rises and announcement of another $10-billion round of tapering in the Fed's monthly stimulus package. Concerns about an earlier-than-expected rate rise, in June next year, have kept investors nervous.

On Wednesday, however, hope emerged interest rates in the US could be kept low for longer, boosting market sentiment and propping market heavyweights, particularly stocks of software giants such as Infosys and Tata Consultancy Services, which gained 2.3 and 1.3 per cent, respectively.

Shares in Europe and Asia rose about a per cent, led by the 500-billion-yuan stimulus provided by the People's Bank of China to five of the largest lenders in that country. Analysts believe the move is an indication demand in the world's largest consumer country could revive and keep stocks at elevated levels for longer.

Bur analysts said for Indian stocks, flows might remain under pressure in the short term, as markets continued to remain in overheated territory. "This is just nervous money getting corrected. Worried investors will take some profits off the table," said Golani.

Jayant Manglik, president (retail distribution), Religare Securities, said, "Broadly, we expect the Nifty to decline further in the coming sessions and consolidate at about 7,800, before any major directional move. Participants, especially investors, should use this opportunity to accumulate fundamentally strong counters with a medium- to long-term investment perspective."

On Wednesday, foreign portfolio investors net-bought equities worth Rs 136 crore, according to provisional data from exchanges. Domestic institutions were net-sellers by Rs 161 crore.

Most sectors closed the day with gains. However, the banking index remained flat, while the consumer durables index declined one per cent. Technology firms rose the most, gaining 1.5 per cent, followed by power and automobile companies.