Stock markets gave the Manmohan Singh-led UPA coalition at the Centre a resounding thumbs-up by celebrating Tuesday?s trust vote victory in Parliament with a massive surge in share prices.
The 30-share Sensex of the BSE, posting its fourth highest gain of the calendar year, closed the day at 14,942.28 points?just shy of the 15k mark?adding a hefty 838.08 points, or 5.94%.
The wider S&P CNX Nifty of the NSE gained 236.70 points, or 5.58%, at 4,476.80 points. It was the fifth-highest gain for the Nifty this year. As a result, investor wealth soared Rs 2.55 lakh crore in a single session.
The unabashed market optimism clearly stems from the anticipation of a slew of reforms, now that the Left is out of the way. Bears were caught on the wrong foot, with many of them rushing to cover their short positions, giving the bulls further leeway.
Investors also heaved a sigh of relief as crude prices cooled to $127 on the MYMEX. Factoring in a UPA win in the House, markets had started to rise over the past week. The Sensex has surged by more than 2,366 points, or 18%, while the Nifty has added 660 points, or 17%.
Manish Shah, head of retail, equities & derivatives at Motilal Oswal Securities, said, ?It was mainly the political clarity that investors took a cue from. We saw a good amount of short covering. Crude also showed some signs of cooling down, coupled with the positive message from other emerging markets, which boosted investor sentiment.?
Shah said he saw a further 1,000-point rally in the Sensex, but said valuations would come into play after that. Indian stocks still look expensive, so FIIs are unlikely to return in big numbers immediately, he added. On Wednesday, however, FIIs were net buyers of equities worth Rs 1,306.56 crore, while domestic institutions took a contrarian view, selling stock worth Rs 875.22 crore.
Amitabh Chakraborty, president-equity at Religare Securities, said, ?Most of the negatives have been factored in and even FIIs did some short covering on Wednesday. They have slowly begun some stock-specific buying.?
On Wednesday, 28 of the 30 Sensex stocks ended gainers. On the BSE, 2,270 stocks ended in the positive, 436 stocks closed in the negative, while 53 stocks remained unchanged.