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Sensex up 418 on global cues

Indian stocks rallied as concerns eased somewhat over losses from the US sub-prime market, reports Vyas Mohan.

business Updated: Aug 27, 2007 21:29 IST
Vyas Mohan

Indian stocks rallied on Monday as concerns eased somewhat over losses from the US sub-prime market and its spillover into the wider economy and also about domestic political uncertainty. Brokers said short covering ahead of the derivatives settlement and firm Asian markets fuelled the run up in domestic shares.

While the benchmark Sensex of the Bombay Stock Exchange gained 417.51 points or 2.89 per cent, the 50-share Nifty of the National Stock Exchange ended the day at 4302.60, up 112.45 points or 2.68 per cent.

“We had a good correction with the Sensex touching its 200-day moving average below 14,000. There were fears of hedge funds facing redemption. But now, all such fears have receded and the domestic markets are showing the vigour to emerge stronger than its peers,” said Ramdeo Agarwal, joint managing director of Motilal Oswal Securities.

The markets advanced on strongly positive breadth with 2,068 stocks advancing on the BSE against 604 declines. Banking stocks gained the most among Sensex stocks, with SBI leading the pack. Shares of SBI galloped Rs 90.40 or 6.17 per cent to close at Rs 1556.65.

The bank has started the process of merging its wholly owned subsidiary State Bank of Saurashtra. The boards of both the banks had given the approval to the merger on Friday.

Among other gainers, ICICI Bank and Maruti Udyog gained over five per cent each. The country’s most valued firm RIL gained 3.3 per cent, along with over three per cent gains in Reliance Communications, HDFC, Hindalco, Tata Steel, Reliance Energy, BHEL and L&T.

However, analysts feel that although both the key indices gained due to short covering ahead of the expiry of August derivatives’ contract on Thursday, the trend may not sustain for too long.

“This appears to be a pre-expiry short covering. As long as there are some short positions left in the market, the recovery will continue as players wind those up. There could, however, be profit booking at higher levels,” said Vijay Bhambwani, CEO of BSPLindia.com.

On Friday, a day after the head of Countrywide Financial, the biggest US mortgage company, said the slump in the country’s housing market could lead to a recession, the US Commerce Department said new home sales in the country rose in July after declining in the previous month.