Value buying, rate cut hopes propel markets; Sensex 171 points up

Attractive valuations, bargain hunting coupled with hopes of a monetary policy easing by the apex bank propelled a barometer index of the Indian equities to gain 171 points or 0.67 percent on Wednesday.

The gains came a day after the barometer 30-scrip sensitive index (Sensex) of the S&P Bombay Stock Exchange (BSE) plunged 541 points or 2.07 percent at 25,651.84 points.

Weak European cues, dwindling rupee value coupled with anxiety over the upcoming derivatives expiry had on Tuesday eroded investors' confidence at the Indian equity markets.

The Indian markets again came under pressure during the initial trade on Wednesday, as weak Asian cues emanating out of a below-expected Chinese PMI (purchasing managers' index) data spooked investors.

The Asian markets fell after the release of the Chinese PMI data. Hong Kong's Hang Seng dropped by 2.26 percent, and China's Shanghai Composite Index declined by 2.16 percent. Japan's Nikkei index was closed on Wednesday.

However, attractive valuations in banking, consumer durables and healthcare sectors supported the Indian markets to pare their initial losses.

Furthermore, value buying was observed at the wider 50-scrip Nifty of the National Stock Exchange (NSE). It gained by 33.95 points or 0.43 percent at 7,845.95 points.

The S&P BSE Sensex, which opened at 25,526.53 points, closed at 25,822.99 points -- up 171.15 points or 0.67 percent from the previous day's close at 25,651.84 points.

The Sensex touched a high of 25,934.02 points and a low of 25,386.48 points in the intra-day trade.

Market observers pointed out that the sharp downward corrections on Tuesday due to weak European cues and Wednesday's initial losses cheapened stocks and prompted value buying.

"Tuesday's correction due to the European market sell-offs and the early morning fall today due to weak Chinese PMI data, made valuations very attractive for bargain hunting," Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.

"Banks and consumer durables sectors have led the recovery. Short covering ahead of F&O (futures and options) expiry also helped the relief rally."

Vaibhav Agrawal, vice president, research, Angel Broking, told IANS that unwinding of positions ahead of September derivative contracts expiry slated for Thursday had made the markets volatile.

"Markets continue to remain volatile ahead of the F&O expiry. Both benchmarks opened on a weak note led by the lower than expected Chinese PMI and negative global cues, but recovered from the lows on account of positive European markets," Agrawal said.

Gaurav Jain, director with Hem Securities said: "Indian benchmarks opened the day on a weak note in line with Asian markets. However, indices took a U-turn with firm opening of European markets."

In Europe, London's FTSE 100 index was higher by 1.57 percent, French CAC 40 rose by 0.56 percent and Germany's DAX Index edged up by 0.46 percent.

All interest-sensitive stocks like banking, automobile and capital goods made substantial gains on hopes of a rate cut by the Reserve Bank of India (RBI) during its upcoming monetary policy review slated for September 29.

The Bank Nifty and CNX Realty witnessed gains of nearly 1 percent.

Sector-wise, banking, consumer durables, healthcare, oil and gas and information technology (IT) stocks supported the market recovery.

Notwithstanding the positive trend, only power and technology, entertainment and media (TECK) sector came under intense selling pressure.

The S&P BSE banking index augmented by 283.82 points, consumer durables index gained by 172.48 points, healthcare index increased by 121.55 points, oil and gas index rose by 86.18 points, and IT index was higher by 40.29 points.

The S&P BSE power index fell by 5.59 points and TECK index slipped by 1.67 points.

Major Sensex gainers during Wednesday's trade were: Lupin, up 2.83 percent at Rs.1,921.30; Vedanta, up 2.71 percent at Rs.94.85; HDFC Bank, up 2.17 percent at Rs.1,049.95; Mahindra and Mahindra (M&M), up 2.10 percent at Rs.1,211.75; and ITC, up 1.28 percent at Rs.316.05.

The major Sensex losers were: Tata Motors, down 1.73 percent at Rs.310.20; Bharti Airtel, down 1.49 percent at Rs.338.10; BHEL, down 1.24 percent at Rs.199.15; GAIL, down 0.86 percent at Rs.287.25; and Bajaj Auto, down 0.79 percent at Rs.2,240.25.