Sensex posts 413-point gain in short-covering rally

Written by Markets Bureau | Mumbai | Updated: Mar 15 2009, 04:28am hrs
Domestic equity markets rallied along with their global peers on Friday, posting the highest gain this calendar year so far, as optimism from a strong US market rubbed off on India. US markets closed positive on Thursdaythe third consecutive day of gaina phenomenon not witnessed since November 2008.

Strong retail sales in February and announcements by Bank of America, Citigroup and JP Morgan Chase that they had profitable operations in the first two months of 2009, thereby raising hopes of revival in the US banking system, brought about the cheer.

As a result, the BSEs 30-share Sensex posted a gain of 4.95%, or 412.86 points, to end the day at 8,756.61 points. The broader S&P CNX Nifty of the NSE ended the trading session gaining 3.89%, or 101.8 points, at 2,719.25 points. Other key Asian indices like the Hang Seng, Nikkei and Straits Times also rallied in the 4.37-5.62% range.

Analysts, however, tempered the news with caution. This is just a technical bounce back from its bottom rather than a fundamental gain. Markets were looking for some good news, which came in the form of positive announcements from Citi and Bank of America. But the market will not be able to sustain the current rally as I believe there is still more bad news to come, said Ambit Capital Pvt Ltd CEO Andrew Holland.

Market watchers say FIIs will continue to adopt risk-averse strategies, pulling money out of more risky assets as the hedge funds industry still faces heavy redemption. On Friday, they were still net sellers of Rs 299.23 crore, according to provisional BSE figures. Elara Capital director & country head for broking Vipul Dalal said, The market has not yet bottomed out yet. To say that the worst is behind us is rather premature.

Fridays rally was mainly triggered by aggressive short covering in interest-sensitive sectors like banking, auto and real estate, helping the BSE end with a weekly gain of 5.17%. Metal stocks also gained on news that the government was imposing a safeguard duty of up to 35% on specified aluminium products to protect domestic industry.

Yes, we witnessed significant short covering across the board, and specifically in banking and real estate. There are still some short positions remaining in banking stocks that might be covered in coming days, which will drive the market higher. However, this is not a turnaround, said Angel Stock Broking fund manager & derivative analyst Siddarth Bhamre.

Realty major DLF was the biggest gainer among the

Sensex pack, up 11.47% or Rs 15.70, at Rs 152.55. The countrys largest private sector lender, ICICI Bank, rose 8.60%, or Rs 24.45, to Rs 284.25.