FIs storm back to help sustain market rally

Written by Markets Bureau | Mumbai | Updated: Apr 10 2009, 04:29am hrs
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Indian equity markets bucked the downward trend of their Asian peers to close on Wednesday at a record five-month high after preliminary estimates showed factory output in February had grown, albeit marginally, after two consecutive months of contraction. The figures are to be officially released on Thursday. Domestic stock markets were among the strongest gainers worldwide, continuing a three-week rally.

Analysts said the current market trend is the precise opposite of that seen last October-November. At that time, there was complete risk aversion and valuations completely fell off a cliff. Now, risk appetite is increasing, which is why the market has gone up sharply in the last three weeks, stated a research note issued by Elara Capital.

The rising risk appetite has been hastened by fund houses, which missed the recent rally and have now started investing. Market breadth, therefore, remained strong throughout the trading session. On the BSE, 2,021 stocks advanced compared with 468 stocks that declined. At the NSE, volumes touched Rs 17,000 crore, the highest in the last six months.

Markets also responded to NTPC posting an annual net profit rise of 5.5%, better than in 2007-08. Even though this was lower than market forecasts, NTPC shares closed up 6.7%, its highest close in 11 months.

The 30-share BSE Sensex opened to weak cues from Asian markets, tanking 362.96 points. However, sustained buying in mid-caps rubbed off on pivotals, helping the Sensex recover to end the day with a 207.47-points gaina 570.43-point rally from the days low. Similarly, the broader NSE Nifty ended the day at 3,342.95 points, gaining 86.35 points, or 2.65%.

A lot of FIIs and foreign mutual funds in India with huge cash positions who missed the recent rally have now started investing in the market, said Gopal Agarwal, head of equity at Mirae Asset Management. Overseas investors were net buyers to the extent of $1.72 billion on April 6.

Antique Stock Broking CEO Anish Jhaveri said, In the last few trading sessions, participation from domestic institutions, including mutual funds, has picked up dramatically. Seeing the increasing number of bulk deals, we sense that the risk appetite of investors is improving. If the rally continues, we could witness the entry of retail investors, whose participation is currently very low.