Sensex posts biggest gain in 3 months

Equity benchmarks surged 4-5% on Friday, the largest single-day gain in three months, riding the bullish wave in world markets. Market watchers attributed the dramatic rally — led by banking shares —to hopes that the battered US financial sector may be on the path to recovery. Globally, the sentiment was boosted by Bank of America chief Kenneth Lewis’ statement that the largest US bank “was profitable” in January and February, echoing statements made by his counterparts at Citigroup and JPMorgan earlier this week. The BSE index rose 412.86 points, or 5%, — its largest single-day rally in over three months — to close at 8756.61. The S&P CNX Nifty gained 101.80 points, or 4%, to close at 2,719.25. Benchmarks were bolstered by a 7% rise in Reliance Industries, which has the highest weightage in both the Sensex and the Nifty. Brokers said panicky traders covered up their short positions, as foreign institutional investors suddenly turned net buyers, mopping up shares worth Rs 300 crore, according to provisional data. “Globally, the view is that the worst is behind us, and that the markets are oversold,” said Dharmesh Mehta, head-broking, Enam Securities. “Additionally, there is tremendous cash in the system with long only funds and hedge funds. The revival in sentiment may see a renewal in risk appetite,” he said, adding that the market may have bottomed out for the time being. Banking stocks were the star performers, led by ICICI Bank, which gained 8.6% to close at Rs 308.70. Other prominent gainers in the sector included HDFC Bank and SBI, which gained 4-5%. Yet, many are sceptical if the rally can sustain. Reliance Equities CEO Keshav Sanghi said we are witnessing a bear market rally. “The statements by the BankAm or CitiGroup CEO refer to profits made at the operating level. The banks still have historical baggage that needs to be addressed,” Mr Sanghi said. “The comment by the Chinese premier that they are worried about the US Treasury is a clear signal that the issues have not all gone away. US unemployment is at 8.1% and housing prices have still not stopped moving downward. While I am happy to see a rally, I am still not certain that a bottom has been made,” he said. Among key Asian markets, Hong Kong, Singapore and Taiwan gained 3-4%. Japan’s Nikkei 225 index jumped 5.1% on expectations that the government will announce additional stimulus measures to lift the sagging economy
Source: ET