Feb. 3: It is difficult to say whether the markets were up on the Pranab effect since the finance minister had tried to give a pep talk to the markets on Wednesday or whether it was because the FIIs decided to do bargain shopping since stocks had fallen quite a bit in the last few sessions.
May be it’s a combination of both but short covering also played a big role in boosting the Sensex. On Wednesday the markets were doing well till around 2.45 p.m., then after the news of former telecom minister A. Raja’s arrest the markets pared some of its gains as people had gone short fearing that a political fallout would see selling pressure continue on Thursday.
But when the DMK leadership said it would not change their equation with the Congress, the short sellers ran for cover, said Mr Ambareesh Baliga of Karvy Stock Broking. There was also less selling pressure because there were fewer institutions in the market as several of them were closed for the Chinese New Year.
Analyts feel that it will need a few more positive trading sessions to say whether this is a sustainable rally. What was interesting was that the markets completely ignored the spike in food inflation to 17 per cent from 15 per cent.
The markets opened positive and even gained momentum in the afternoon despite the European markets opening in the red on fears that the Egyptian crisis could escalate and there could be disruption of traffic through the Suez Canal. Bent crude jumped to $103 a barrel. “The fact that the rupee bounced back on Thursday shows that money has come in and that is a good sign. But it will be a few days before one can say whether this rally is temporary,” said Mr Hiren Dhakan of Bonanza Portfolio Ltd. The Sensex gained 359 points at 18,449.31 whilst the Nifty closed at 5526.75 up 94.75 points.Among the big gainers were Bharti Airtel up 5.86 per cent and DLF up 8.15 per cent.
Mr Amar Ambani of IIFL said notwithstanding the two-day recovery, the Nifty continues to trade below the 200-DMA. So, the big question is will the current rally sustain for long? For the time being, traders and investors are a relieved lot after being on the receiving end for the past few sessions.
Going forward he said, the market’s direction would hinge on how the Government acts on the policy front after a dismal first year of UPA II.