Sensex bounces back, surges 507 pts on FM stimulus talk

Sensex bounces back, surges 507 pts on FM stimulus talk
Financial Express, November 5, 2009, Page 5

fe Bureau, Mumbai

The domestic equity bourses, led by index heavyweights, snapped its six-day loosing streak to post its highest gain in the last five months with the finance minister saying that the government would not withdraw the stimulus package. The 30-share Sensex of the the Bombay Stock Exchange (BSE) registered a solid gain of 507.19 points or 3.29% to end the trading session at 15,912.13 points, completely erasing its loss suffered in the previous trading session. On the other hand, the broader 50-share Nifty of the National Stock Exchange (NSE) ended the day at 4,710.80 points, up by 3.22% or 146.90 points.

Besides reassurance from the government on stimulus measures, experts attribute the sharp recovery in the equity market to short covering by traders ahead of the key policy statement by the US Federal Reserve on Wednesday. Further weakening of dollar against major currencies also helped emerging market equities attract more funds.

“After yesterday’s steep fall in the domestic market, some amount of bounce back was expected. But the sharp recovery in share prices was also on account of short covering in the derivative segment ahead of the US Federal Reserve's statement on interest rate and economy later in the day,” said Gopal Agarwal, head of equity, Mirae Asset Global.

“This was a technical pullback as some amount of short covering has to happen as the markets were in an oversold territory after Tuesday's trading session,” said Sashi Krishnan, CIO, Bajaj Allianz Life Insurance.

UBS Investment Research, in a note to its clients said the recent correction in the market provides good buying opportunity. "We believe that the recent correction in the Indian equity market presents an excellent buying opportunity. We increase our exposure to autos and telecom and introduce an overweight on pharma."

The domestic equity market started its declining trend after the Reserve Bank of India (RBI) had signalled its exit from the accommodative monetary policy by a 1% hike in the SLR last week. This gave a clear indication to market participants that there would be further monetary tightening either during this year-end or at the beginning of the next year.

Global investors are keenly awaiting the policy statement from the US Federal Reserve on interest rate after the Australian Central Bank raised its key policy rates for the second month in a row, according to market participants.