BULLS ON THE RAMPAGE

BULLS shrugged off the impact of the knock-out punch delivered on Tuesday by RBI, bouncing back strongly on the back of falling oil prices and firm global markets.
Concerns relating to the local economy, mainly inflation and rising interest rates, receded to the background as the 30-share Sensex ended Wednesday at 14 287, a gain of 495.67 points or 3.6% while the NSE Nifty rose 124 points or 3% to 4314. Wednesday’s rebound helped the market recoup a significant part of Tuesday’s losses caused by the steep hike in the benchmark — shortterm rate by 50 basis point. The Sensex had fallen 558 points and the Nifty by 142 points on Tuesday.
But there is a cautious undertone to the rally as according to brokers, the bounceback was more because of technical reasons than fundamentals at play. After pressing heavy sales during the last few days, traders rushed to cover their short positions ahead of the expiry of futures contracts on Thursday, said brokers.
Local institutional investors lent good support even while foreign portfolio investors who have so far sold over $6.8 billion worth of stock this year continued to be on a selling spree. Indian institutional investors bought equities worth Rs 672 crore while overseas investors were net sellers at Rs 628 crore on Wednesday.
“The rally was like a pullback from lower levels. We are yet to come out of the woods completely as the CRR hike was a big jolt to the market,” said Indiabulls Securities CEO Divyesh Shah. In the near term, the market will take a cue from the movement in oil prices and the weekly inflation numbers, he said.
On Wednesday, crude oil prices fell below $121 a barrel on reports that gasoline demand in Asia and the US may slow in the near term. Prices, in fact, have slipped more than $25 a barrel, or 17%, from their July 11 record levels.
Softening oil prices had its positive impact on global markets. In the US, the Dow Jones Industrial Average and Nasdaq Composite Index jumped 2.4% and 2.5% while key Asian markets led by Hong Kong rose between 0.7% and 2%. The global euphoria was also attributed to Merrill Lynch’s recent writedown, after which confidence among consumers appeared to have gone up.
Back home, brokers reckon that the market will take some time to absorb the shock of further monetary tightening. Analysts fear such measures would lead to a slackening of consumer demand and impact growth, particularly in interestsensitive sectors such as banking, auto and real estate.
These concerns took its toll on shares across sectors on Tuesday when the BSE Bankex plunged 8.3%, Realty 5.5% and Auto 4%. Wednesday, however, saw a reversal in the downtrend as the three indices bounced back 5.2%, 5% and 2.8%, respectively. Good buying was also observed in metal, IT, oil and gas and power stocks as the respective indices rose between 3.3% and 4.7%. Overall, the market breadth was positive with 1,784 gainers and 857 loser stocks on BSE on the day.
Source : the economic times dt 30 7 2008