After more than a month-and-a-half of losses, the stock markets opened the third week of February on a strong note. On Monday, the Sensex closed the day at 18,202.2, up 473 points, the largest rise on any day over the last nine months.

The Nifty closed at 5,456, up 2.75 per cent, or 146 points.

All categories of investors were net buyers on Monday. Foreign institutional investors (FIIs) bought stocks worth a net amount of Rs 147.64 crore and domestic institutional investors (DIIs) for Rs 109.02 crore on NSE and BSE. Retail investors on the BSE bought equity for Rs 89.04 crore in the net.

“The markets were oversold, which was why the upward rally in the market happened today,” said Mr Kaushik Dani, Fund Manager- Equity, Peerless Mutual fund. “This is more of a relief rally; value-based buying at low levels. Valuations have come down to low levels. It's a good time to buy for those looking at a longer-time horizon. Though the relief rally will continue for some more days, the picture will only get clearer once the Budget is out,” he added.

Global oil prices have cooled to $85 to a barrel following the exit of Egypt's Hosni Mubarak and this added to the positive sentiment, said experts. “Had oil and gas heavyweights RIL and ONGC seen bigger gains, the Sensex and the Nifty would have seen bigger gains,” said Mr Amar Ambani, Head of Research (India Private Clients), IIFL. But these stocks did not rise significantly because oil prices are still seen to be volatile.

All the indices on the BSE and NSE were in the green on Monday, with volatility going down 3.79 per cent over the previous close as the volatility index, India VIX, closed at 22.58. Auto, metals, banking and capital goods sectors led the rally on Monday.

Budget session

Market experts said that investors generally square off or unwind their positions before a significant event. “With the Budget session starting on February 21, there is bound to be uncertainty until March,” said the head of research at a brokerage.

Experts said the current rally is only a bounce-back from the ongoing correction even though India's fundamental growth story is intact.

“Till the time the system doesn't resolve macro issues requiring urgent attention, such as inflation, interest rates, liquidity and governance, 2011 will look a bad year in comparison with 2010,” said Mr Mansingh Deshmukh, Head of Equity, JHP Securities.

Retail investors still seem to be wary of trading, although they were net buyers on Monday. “Though many friends of mine bought today, I did not because of the rate at which the market has been moving up and down nowadays,” said Mr Shailesh Khera, a retail investor.

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