Despite low industrial output, the BSE Sensex touched the 18,000-mark after seven months, with a gain of 0.8 per cent. It ended the day at 18,000, up 147 points. The NSE Nifty closed at 5,431, up 0.8 per cent.

Market players attribute the rally to the influx of foreign flows. “The flows are entirely based on foreign liquidity as there is very little happening at the reforms front in the country to lend any optimism,” said Jagannadham Thunuguntla, Strategist & Head of Research, SMC Global Securities. Since April 2012, the FIIs have been net buyers about 64 per cent of the time. On Wednesday, FIIs were net buyers at Rs 451 crore.

Some analysts attribute the rally to the heightened hope that the RBI will reverse the interest rate cycle and the Government will bring in reforms. Analysts have gone as far as calling it “the last leg of hope”. They fear a ratings downgrade in the case of a failure on the Government’s part to restart the investment cycle. Domestic funds were net sellers at Rs 55 crore while on the BSE, retail investors sold shares worth Rs 250 crore.

(This article was published on September 12, 2012)
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