Sensex surges 409 pts after dull start

The key domestic equity indices, Sensex and Nifty, gained close to 2.5 per cent today on firm global cues and heavy buying by foreign institutional investors (FIIs).

While the S&P CNX Nifty of the National Stock Exchange (NSE) closed the day at 5,003, up 122 points, the Bombay Stock Exchange (BSE) Sensex was at 16,849, up 409 points, at close of trade. The rally was mainly due to a sharp rise in index stocks like Jaiprakash Associates (up 6.3 per cent), Reliance Infrastructure (up 5.3 per cent), Infosys (up 4 per cent) and Reliance Industries (up 2.7 per cent).

The BSE metal index rose 4.2 per cent to 15,700, while information technology, consumer durables, capital goods, realty and auto indices added 2-3 per cent.

FIIs made net purchases of over Rs 861 crore in the cash segment. Domestic institutional investors were net buyers to the tune of Rs 90 crore.

The rally was in line with other Asian markets after China reported continued strength in industrial production growth. Markets opened flat and fell in the negative zone during the day. The Sensex, however, witnessed a swift rise of over 300 points in the last one hour of the trading session.

The benchmark has gained nearly 10 per cent in the past six trading sessions, making up the losses of the fortnight before this. It has risen more than 70 per cent this year.

In Asia, Hang Seng gained 1.6 per cent. Straits Times was up 1.2 per cent, Taiwan Weighted rose 0.98 per cent and the Nikkei 225 ended flat. Shanghai Composite was down 0.1 per cent. The benchmark indices in France, Germany and the UK were up between 1.2 per cent and 1.49 per cent. Markets in the US had ended flat on Tuesday after a spectacular rally on Monday. The Dow was up 0.2 per cent to close at its highest level since October 3, 2008. The S&P 500 and Nasdaq Composite index slipped 0.1 per cent.

The sentiment in the domestic market was boosted by Prime Minister Manmohan Singh’s announcement on Sunday that financial reforms, such as building a domestic bond market and expanding foreign investment in sectors like insurance, would be taken forward.

“The sharp rise in the last leg of today’s trading was unexpected. Nifty’s move above 5,000 was unexpected. Liquidity is the major driving factor as flow of foreign money is robust due to the weak dollar,” said Ambrish Baliga, vice-president at Karvy Stock Broking.

A Balasubramanian, chief investment officer, Birla Sun Life, said: “There is ample liquidity in the system and valuations are back to the October levels. The buoyancy is expected to continue, given the positive earnings outlook, reform initiatives by the government and the possibility of a stable interest rate regime.”

According to market players, by next week, the government is expected to put out a list of public sector companies in which it will dilute its stake. Also likely are names of the companies which are expected to come out with follow-on public offers and rights issues.

The overall market breadth was positive as 61 per cent, or 1,726 stocks, rose, and 1,004 declined.