US move to clear toxic loans drives up global markets

Written by Markets Bureau | Mumbai | Updated: Mar 24 2009, 06:34am hrs
The US plan to remove $1 trillion in toxic loans from its banking system pushed up the Sensex, the 30-share index of the Bombay Stock Exchange, by 5.1% on Monday to 9,424.02the highest in this calendar year. The market rode the rise in the European spot rates as well as a 2.5% rise in the US futures, a barometer of how spot markets would behave.

FIIs were net buyers on Monday, so too were domestic institutions. The S&P CNX Nifty of the National Stock Exchange (NSE) gained 132.85 points or 4.73% to end the day at 2,939.90 points. This is the highest the index has gained in the year.

Investment guru Mark Mobius, chairman of Templeton Asset Management, was optimistic that a bull rally had begun. In an interview with Bloomberg Television, Mobius said that the emerging markets were in better shape than their counterparts in the developed markets. You have to be careful not to miss the opportunity, said Mobius. With all the negative news, there is a tendency to hold back. But Sudip Bandyopdhyay, director & CEO, Reliance Money, said, It was kind of a pull-back rally for the markets, as several upbeat news emerged in the markets.

The MSCI Emerging Markets Index on Monday climbed the most in nearly two weeks, erasing losses for 2009. The MSCI Emerging Markets Index has jumped 26% since reaching a four-year low on October 27, outperforming the 4.2% drop in the MSCI World Index and 9.5% decline in the Standard & Poors 500 Index. Emerging markets made up the 10 best-performing benchmark gauges this year, led by the 28% gain in Chinas Shanghai Composite Index.

Volatility is expected to increase, as the elections draw close. If markets are closed higher, that doesnt mean that all horrific news is out. There are strong chances that, once again markets will have some downward rally, added Bandyopdhyay.

Commenting on the developments, Hiten Gala, senior manager-advisory at Sharekhan, said Apart from FII buying, we had some fantastic volumes turnover at both the exchanges. There was also huge short-covering witnessed in the market ahead of expiry of March contracts on Thursday. The Instanex FII Index was up 5.21% over Fridays close, easily outpacing all other investor classes in the Instanex Ownership Indices, which track buying patterns by various constituents in the market. This also caused the rupee to rise by 0.4% to Rs 50.46 a dollar, paring its decline for the year to 3.6%.

All the sectors in the BSE Sectoral indices ended the day in the green, with banking, oil & gas and metal indices being the top performers. The market breadth remained strong during the day, as out of 2,642 stocks traded on BSE, 1,629 closed in the green while 899 stocks closed in the red and 114 stocks remained unchanged. Among the Sensex pack, 29 stocks advanced while one stock declined.