The Sensex rallied smartly on Friday, gaining 440.13 points or 2.79% to close at 16,232.54, tracking sentiment in other Asian markets. The MSCI Asia Index rose 2%, approaching its biggest two-day gain in two years. The rise comes ahead of a crucial Sunday meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy, intended to resolve the euro zone?s lingering debt crisis.
The index had given up 16% in the last quarter, the biggest drop since 2008, in the wake of a ballooning debt crisis in Europe and a near-recession in the US. Korea?s Kospi rallied nearly 3% on Friday while the Hang Seng surged more than 3%; Japan?s Nikkei has added close to 3% across two sessions.
Key European indices like the FTSE, DAX and CAC-40, meanwhile, were all trading in the green.
European markets were up following efforts by central bankers in the region towards a fresh stimulus and anticipating initiatives to help struggling banks. The Dow Jones Industrial Average opened up about 0.67%.
US stocks rallied for a fourth day while Treasuries and the dollar fell, after larger-than-forecast growth in jobs tempered concern that the economy was slowing. US stocks had gained over 1.5% on Thursday, as global stocks posted their third straight day of gains, after the Bank of England left interest rates unchanged at 0.5% and enhanced its asset purchase programme by 75 billion pounds to 275 billion pounds. The European Central Bank (ECB) announced promised to support banks that have seen wholesale funding drying up as market confidence ebbed while the EU said it would present a plan for a coordinated recapitalisation of banks and for cleaning them up.
ECB president Jean-Claude Trichet said the bank will resume purchases of mortgage-backed securities and reintroduce year-long loans for banks. Gold, oil, copper and equities were all on course to post weekly gains in the hope that the two-year-old sovereign debt crisis maybe nearing the end though. Since Standard and Poor?s downgraded US debt in early August, equity markets have been turbulent with investors fleeing to safe havens like the dollar. Emerging markets (EM) have seen large sums being pulled out; Citigroup analysts say outflows from EM equity funds accelerated in the week to October 5, with a net $1.3 billion pulled out from Asia. Foreign institutional investors have sold Indian equities worth $660 million this year.