Sensex recoups losses on DII buying

Written by fe Bureau | Mumbai | Updated: Aug 29 2013, 14:05pm hrs
After falling nearly 3% in the morning trade, Indian equities staged a strong comeback on Wednesday, led by buying from large domestic institutional investors (DIIs) most noticeably Life Insurance Corporation of India (LIC).

After falling nearly 520 points or 2.9% from Tuesdays close in intra-day trade, the Sensex ended up 28.07 points or 0.16% to settle at 17,996.15. The Nifty ended the day at 5,285, down 2.45 points or 0.05%. Earlier in the day, the 50-share gauge had declined around 168 points or 3.1% from Tuesdays closing.

A part of the recovery was also driven by an intra-day rebound in the rupee to near 67.65/$. The rupee, however, failed to hold on those gains and closed at a fresh record low of 68.8250/$ on Wednesday.

Life Insurance Corporation (LIC) as well as a few state-owned insurance companies and mutual funds , were buyers in today's market said traders. While the exact quantum could not ascertained, market sources said LIC may have bought shares worth R1,000-1,100 crore.

Short covering led to some recovery in the market, which were largely oversold. However, the outlook remains weak and markets will remain volatile in the near-term, said Vikas Khemani, president and co-head of wholesale capital markets, Edelweiss Capital.

Provisional data from stock exchanges showed that DIIs net bought R506.77 crore of Indian equities on Wednesday, while their foreign counterpart sold around $163 million (R1,120.43 crore).

Overall, DIIs have bought R4,757 crore worth of shares in the last eight sessions. On the other hand, foreign institutional investors (FIIs) have net sold around $1.2 billion of Indian equities during the same period. Long-only funds and foreign brokerages with proprietary desks are reducing their exposure into Indian equities, said traders.

While the markets rebounded on Wednesday, most expect pressure to continue due to domestic economic concerns along with global worries like tensions surrounding Syria and rising oil prices.

We need policies that focus on medium-term and long-term growth and solving short-term solutions, said UR Bhat, MD, Dalton Capital Advisors.

The sharp up-move in the Indian rupee as well as stock market on Wednesday saw the exchanges post their record turnover. In an extremely volatile situation, the combined turnover on BSE and NSE surged to R4.46 lakh crore, thus beating the previous high of R4.41 lakh crore seen on February 28.

India VIX, volatility index based on the CNX Nifty index option that measures the market's expectation of volatility over the near term, jumped another 10% on Wednesday to 32.38 the highest since October 2, 2011 when it stood at 33.02.

Asian and European stocks also fell over concerns about the prospect of a military strike against Syria by the US government. In Asia, the Nikkei lost 1.5%, while Stock Exchange of Thailand SET Index declined 1.41%. Hang Seng lost 1.6%, while the Shanghai Composite ended down 0.1%. Jakarta Composite (+1.5%) and Taiwan Stock Exchange Index (+0.05%) were the sole gainers in the region.

Major European indices the FTSE, DAX, CAC, and IBEX were trading down in the range of 0.5-1.5% at the time of going to print. On Tuesday, major US indices ended down 1.2-2.2%.

While most of the major Asian markets have been suffering, India continues to be the worst performer this calendar year. The Sensex has given returns of -7.36% in rupee terms and -26.61% in dollar terms.

On Wednesday, 11 out of 30 Sensex stocks ended in the red. The wider market breadth was weak as 58.5% or 1369 of the total stocks declining. Seven out of 13 sectoral indices on BSE ended weak, with the banking, capital goods, power and realty indices losing 0.5-3%.

ONGC was the biggest loser, with the scrip losing almost 6%. Other losers include GAIL (-3.45%), Coal India (-2.3%), Bharti Airtel (-2.2%), Maruti (-1.8%) and Mahindra & Mahindra (1.6%).