Sensex gains 178 points to close above 19k on strong FII buying

Written by fe Bureau | Mumbai | Updated: Mar 30 2011, 05:36am hrs
Buoyed by sustained buying from overseas investors and a declining trend in global crude oil prices, domestic equity bourses extended their rally for the sixth consecutive day helping the 30-share BSE Sensex to close above the psychological 19,000 level. The benchmark BSE Sensex closed at a two-month high of 19,120.80, gaining 177.66 points or 0.94%. The broader NSE Nifty closed at 5,736.35, gaining 49.10 points or 0.86%.

Provisional data from the exchange showed that FIIs were net buyers of equities to the tune of R1,291 crore while the domestic institutional investors sold equities worth R474 crore. For the year till date, FIIs have invested $1.2 bilion into equities and after remaining net sellers during the month of January and February 2011. Also, 83% or R4,343 crore worth of their purchase has happened in the last six trading sessions during which Sensex was up 7.2%.

The current rally is more based on liquidity as the flows from overseas investors have been really good in the current month. Based on the high volumes in some of the large cap counters, it appears that medium to long term investors are now active in the market, said Samir Gilani, head of equity, MAPE Securities. However, he added that there were many institutional investors like hedge funds and large proprietary traders who were not really convinced about the current rally and chose to remain on the sidelines. The current uptrend will force even these large investors to enter the market , which is expected to further push the share prices higher, he added.

However on a different note T S Harihar, head of institutional derivatives at ICICI Securities said that domestic institutional investors like insurance companies and few mutual funds are aggressively buying domestic shares as they don't want their funds net asset value to go down at the end of the financial year. He further added that investors who had taken short positions anticipating a fall in the market were forced to cover those positions with Nifty initially breaching 5,450 points and 5,690 points taking the markets further high.

But the market breadth remained weak on Tuesday, as investors squared up positions in small-cap and mid-cap shares due to year-end considerations, according to market participants. According to them, HNIs are booking their notional loss to show against their capital gains to seek tax benefit for the current financial year. While 1,818 stocks on BSE slipped, 36.77% or 1,116 stocks gained ground on Tuesday.

Meanwhile, Nifty and Sensex closed above their 200-DMA. Given that the previous two market pullbacks seen in February were restricted exactly at the level of 200-DMA, markets positive close above this reflects bullish undertone.