After a week of sluggishness, the markets finally saw some directional move with the Sensex gaining the most since December 10. Helped by positive global cues, the 30-share index advanced 230.61 points, or 1.15%, to 20,256.03, its highest close in more than six weeks. Meanwhile, the broad-based 50-share Nifty gained 64.4 points, or 1.07% to 6,060.
Sentiments were also boosted by robust holiday sales for retailers in the US, which climbed to highest level in five years. The Sensex gains was led by financials, FMCG and metal companies with HDFC Bank, HDFC and ITC being the biggest contributors. Market experts, however, cautioned from reading too much into Wednesday?s gains as they took place on low volumes.
?Markets have moved up on low volumes. There is still not enough participation in the markets. Therefore, it is not a big factor to decide market direction,? said Vikas Khemani, head institutional equities, Edelweiss.
The combined cash market turnover on both the exchanges on Wednesday stood at Rs 12,483 crore, while that in the F&O segment was Rs 125,045 crore. The market turnover is about 50% lower than its three-month average as this is a holiday season for most institutional participants. Most Asian markets closed positive on Wednesday while European markets and US futures index opened higher.
Foreign investors were buyers for the fourth consecutive day, while their domestic counterparts sold for the fifth consecutive day. FIIs bought shares worth Rs 548 crore, while DIIs sold worth Rs 170 crore, according to provisional data provided by the NSE. Foreign investors have poured in a record $28.5 billion into Indian equities so far this year.
India has received more than its fair share of flows in 2010. It has attracted 44% of the total fund flow into Asian market equities, excluding Japan and China, in 2010 as against 29% in the previous year, as per Bloomberg data. ?We expect 2011 inflows into Asia to be better than 2010. Although India?s share will come down, we are not expecting foreign flows to turn negative,? said Ashish Gupta, director-equity research , Credit Suisse recently at a conference.
All Sensex components, barring three, gained during the day. The overall breadth of the market was also positive with the advance-decline ratio being 1.65:1. The broad markets and small cap index gained in line with the benchmark indices. On sectoral basis, consumer durables, FMCG and metal indices gained the most. ?Market are likely to correct from here in the short term as high crude prices will spike inflation which will lead to interest rates tightening and deterioration in corporate earnings,? said Khemani.
