The Hindu Business Line : Sensex rebounds with 864-pt gain but optimism guarded

Mumbai, Jan. 23 There was some respite for investors as the Indian markets recovered from the heavy losses suffered over the past few days to post a modest gain of five to six per cent, and market participants are looking to the future with guarded optimism.

“Today’s gains have arrested the sharp fall; it (the market) will consolidate from here on before renewing a stable direction,” Mr Sanjay Sinha, CIO, SBI Mutual Fund, said adding that the long term trend is bullish though it may be volatile in the short term.

Barring a few, most of the top 500 companies by market cap on the BSE 500 index rose in value. These stocks account for nearly 90 per cent of the BSE’s market capitalisation. But, for the market as a whole, there were more losers than gainers.

Earlier, the BSE benchmark index opened with a gain of 685 points taking a cue from the Asian markets and went up by 1,046 points in the intra-day trading but the gains were narrowed down towards the close and the BSE Sensex settled at 17,594 with a 5.17 per cent gain of 864 points.

Major Asian markets too closed in the green. The Japanese Nikkei gained over 2 per cent, Hong Kong’s Hang Seng was up 10.72 per cent, China’s Shanghai Composite was up 3.14 per cent, and South Korea’s Seoul Composite was up 1.21 per cent.

“I don’t think the market is completely out of the woods as US financial markets may see some more negative news coming in, and to a degree the markets will be on tenterhooks,” Mr Nipun Mehta, Co-Founder and CEO, Unitis Tower Wealth Advisors, a private wealth management firm, said.

FII position

The Foreign Institutional Investors (FIIs) were yet again net sellers by Rs 3,021 crore as per the provisional NSE and BSE data. But compared to the previous day, the domestic institutional investors were less dominant with net purchases of Rs 1,291 crore, thus accounting only for 40 per cent of the net sales by FIIs.

“Margin problem is still not sorted out at the exchange level as the exchanges have been increasing margin with limited period notice. The market is still not out of the woods,” Mr Mehta said.

“However, the corporate results which have been good and on expected lines, haven’t been factored in adequately enough by the Indian market,” Mr Mehta argued.

The gains were across the sectors but were more pronounced in those sectors that lost heavily during the market meltdown. Realty sector gained the maximum of 11 per cent; power sector gained 9.81 per cent, oil and gas gained 8.73 per cent.

The midcap companies came back strongly, with the BSE midcap index showing a gain of 8.15 per cent while the small cap index underperformed the market with a gain of just 4 per cent.

The ‘advance-decline’ ratio (the number which measures the proportion of stocks that gained to the ones that lost) saw a complete reversal of trend to the one observed in the last two days. Of the 30 Sensex stocks, 29 ended with a gain. Among the BSE 100 stocks, 96 recorded a gain.

A little less than 50 per cent of the total 2,722 companies that traded on the BSE advanced on Wednesday with the final tally showing 1,300 advances as against 1,401 declines, while 21 ended unchanged.