The Hindu Business Line : Markets on a song

Mumbai, July 23 The stock markets on Wednesday greeted the Manmohan Singh Government winning the confidence vote with a six per cent gain in the benchmark indices, but marketmen doubted whether the rally would sustain.

Foreign institutional investors were huge buyers while day traders and retail investors took short-term positions, said brokers. Domestic institutions, on the other hand, booked profits.

“Everybody is sitting on cash, but when and whether they will buy is anybody’s guess,” said the head of equities at a mutual fund house.

The Sensex closed with a gain of 838 points at 14,942 while the Nifty closed at 4,476, higher by 236.70 points, marking their fifth consecutive day of gain.

“The markets opened strong as there were a host of positives including the government surviving the vote of trust, positive global cues and crude prices falling to $125 a barrel,” said Mr P.K Agarwal, President-Research, Bonanza Portfolio Ltd.

Lingering negatives

However, many believe that the rally may not sustain as there are lingering negative factors such as inflation and the uneven spread of the monsoon.

“This rally is very natural after the continuous fall the markets had seen in the recent past, but it is likely to be short-lived and will mainly be on the back of speculative activity rather than fundamentals”, said Mr Vishwas Agarwal, an independent analyst.

Day traders and retail investors have taken two-and three-day positions in the market, said brokers. Such investors are likely to book profits and exit soon after, they added.

Foreign financial institutions and domestic institutions moved in contrary directions ; FIIs were net buyers of equities for Rs 1306.56 crore while domestic institutions were net sellers for Rs 875.22 crore, according to provisional data.

“There was substantial buying by FIIs while the domestic institutions booked profits to an extent”, said Mr Jignesh Desai, Head of Institutional Sales, SBICAP Securities.

Volumes rose sharply; turnover at NSE increased to Rs 20,418.14 crore, 50 per cent higher than Tuesday’s.

Both Nifty and Sensex futures were trading at a premium.

Bankex, major gainer

Among the sectoral indices, BSE-Bankex was the highest gainer, at 9.99 per cent, up on hopes of government reforms in the sector.

“Previously banking and insurance reforms were a hurdle because of the Left parties , but now the government is free to take whatever steps are necessary for the reform process”, said Mr Agarwal.

The other index gainers were BSE-CG which was up 8.18 per cent, BSE-Realty (8.08 per cent), BSE-Power (7.74 per cent) and BSE-Metal (6.85 per cent).

The top gainers were Reliance Communications (12.20 per cent), ICICI Bank (11.64 per cent), BHEL (10.92 per cent), HDFC (10.92 per cent), SBI (10.45 per cent), Reliance Infrastructure (10.36 per cent), HDFC Bank (9.57 per cent) and DLF (9.12 per cent).