It took the markets three seconds to give a thumbs up to Verdict 2009.
The Sensex rose by 10 per cent and the Nifty by 15 per cent on Monday when the first circuit prevented them from rising any further.
Two hours later, the two indices that capture more than 45 per cent of India’s companies by value closed the day after hitting a second circuit — jumping 17.3 per cent and 17.7 per cent, respectively.
<b1>To prevent undue volatility, stock exchanges apply 'circuit breakers' that automatically kick in when the rise or fall in a share or an index crosses a prescribed limit.
This highest-ever rise in the value of shares took the Sensex to an eight-month high of 14,284 — a gain of 75 per cent in just over two months since the rally began on March 9 — leaving investors wondering whether they had missed the rally. Again.
The reaction to Verdict 2009 was in sharp contrast to what happened after Verdict 2004.
Five years ago, on May 17, the Sensex crashed 842 points, or more than 15 per cent, hitting a negative circuit on fears that the Left Front’s support to the UPA government would stall market-friendly measures.
At a hurriedly called press conference, Manmohan Singh had assured reporters that there would be no rollback of economic reforms. When trading resumed, the Sensex cut losses and closed 564 points down.
Monday’s rise was backed by just 845 stocks against 2,500 on an average with a turnover of Rs 126 crore (which is less than 10 per cent of an average trading day).
"Trading volumes were less than 5 per cent of the normal trading volume, but market participants are convinced of the reform process,” said Gajendra Nagpal, CEO, Unicon Investment Solutions.
Experts believe that long-term movement will depend on factors such as the uncertainty around global markets and the contracting export volume.