The Hindu Business Line : Broad-based rally helps Sensex recover ground

MASSIVE volatility continued to rock the stock markets during the last trading session of the week. The first four sessions of the week also witnessed volatile trading during which the major indices swayed over a large range of points.

However, unlike the previous three sessions, when the indices opened strongly, but lost steam midway and ended with huge losses, the trading session on Friday saw a strong broad-based rally that led to the indices rocketing upwards.

Click here for table

Friday's session closed with massive gains to both the benchmark indices - the Bombay Stock Exchange Sensitive Index (Sensex) and the National Stock Exchange's S&P CNX Nifty index. The surge in buying support was witnessed in almost all the counters of the two indices.

Institutional investors were behind the massive demand for pivotals. The value buying in index heavyweights came after the crash in indices during the previous two sessions shaved off a large chunk of the gains in stocks such as Reliance Industries, Tata Steel, Infosys Technologies and Tata Motors.

At the BSE, the Sensex opened higher at 5,646 points on Friday morning, but a renewed bout of nervousness and the consequent selling pressure led to the index touching an intraday low of 5,596 points. The weakness, which persisted for an hour during the session, seemed to portend the beginning of another day of losses for the major indices. However, a surge in buying support during the second half of the session led to a whopping near four per cent gain for the Sensex.

Right through the second half, the Sensex never looked back and posted a handsome 223 points jump. Traded value of all Sensex stocks crossed the Rs 1,700-crore mark from 3,07,305 trades.

There were only three stocks that closed Friday's session in negative territory. The stocks were ITC Ltd, ICICI Bank and HDFC Bank. The big gainers on Friday were in the information technology, steel, auto, engineering, pharmaceuticals and public sector undertakings segments. Friday's resurgence in the bull run, which has lasted the last eight months, seems to have instilled hope in the market that there is still some value left to be discovered.

The broad-based nature of the rally has also vindicated the stance of some of the leading investment bankers that the strong economic fundamentals are likely to further boost stock prices. Rating agency Moody's upgrade of India's ratings to investment grade has been another reason for the strong positive sentiment of Friday that convincingly reversed the crash in the indices during the previous sessions of the week.

The other reason for the boost to sentiment on Friday was the steady flow in of good corporate quarterly performances. The major gainers among the 30-Sensex stocks included Tata Motors up over 12 per cent at Rs 467.5, BHEL up over 10 per cent at Rs 565, Zee Telefilms up over nine per cent at Rs 156, Satyam Computer up 9.3 per cent at Rs 342, BSES up 8.7 per cent at Rs 517.5, Tata Steel up about 8.5 per cent at Rs 427, State Bank of India, ONGC and Hero Honda were all up by over 7 per cent and Infosys Technologies, Larsen & Toubro and Tata Power were all up by over six per cent.

With such wide spread optimism, about 1,501 stocks advanced as against 511 stocks that declined. This is in contrast to the trend in the past three days when the majority of the stocks were on a decline.

More than 70 stocks hit the upper circuit filter and were frozen without sellers. Notable among them were Natco Pharma, Jupiter Bioscience and Aban Loyd Chiles.

In contrast, Indian pharma stocks such as Matrix Labs and Jubilant Organosys were in the lower circuit with no buyers.