Aggressive short covering on futures and options contract on the expiry of May series helped the domestic equity indices extend gains for the second consecutive day. The 30-share Sensex surged 278.56 points or 1.70% to close the day at 16,666.40, while the Nifty scaled above the 5,000 level to close at 5,003, up 85.70 points.
The rally in the domestic market was also supported by a surge in Asian stocks. Nikkei 225 came off from their six months low to gain nearly 1.25% on Thursday. Similarly, other key Asian indices staged a strong rally with Hang Seng up 1.22%, Shanghai Composite 1.15%. Kospi and Strait Times were up 1.60% and 1.62% respectively.
In the early trade session, US equity markets were also up 2%. ?Stock markets are oversold and may rally strongly over the next few days,? said investor Barton Biggs of New York-based hedge fund Traxis Partners LP. ?The market is very, very oversold and I think we?re going to have a big pop to the upside some time in the next couple of days,? said Biggs.
FIIs were net sellers worth Rs 533 crore while domestic institutions purchased Rs 410 crore shares. Short covering was quite visible among institutional investors. Even the aggression in the short rollover to the June derivative series have come down indicating that pessimists are getting out of their positions,? said Bhavin Desai, manager (derivatives), Motilal Oswal Financial Services.