The Sensex got endearingly close to 18,000 as it galloped from the day's open of 17,467 to 17,953 a little after noon.
Correction set in at that point and it got deeper as panic spread--the Sensex tumbling down to 17,288. The Hang Seng, the Hong Kong Stock Exchange index and the best performing, fell 1626 points, creating fear among Indian traders.
Yet the bears did not prevail as the market bounced back within minutes of touching the day's low. "It is a bit scary. The concept of value-based investing is gone as what one predicts on prices today comes true the next day," said the head of a brokerage firm.
Market experts say the liquidity tap is overflowing with foreign money pushing scrips up unhindered ever since the Fed cut interest rates last month. "Though valuations are on the higher side, money is shifting from dollar assets to non-dollar assets, especially to India, which enjoys a higher rating among emerging markets. However, today's volatility is a warning to investors that a correction could come in at anytime," said Jignesh Shah, head of equities of ABN Amro Private Banking. On October 1, foreign funds had bought Rs 2,196 crore worth of stocks over and above a record net purchase of Rs 16,132 crore in September.
As anticipated, Reliance Power filed its draft red herrings prospectus to issue 1.3 billion shares. Reliance Energy has run up on the back of the IPO news and it has been the best performer among the Sensex stocks with an 86 per cent rise in a month. "We do not think raising money through an IPO for power projects has been fully factored into the Reliance Energy stock price," said a senior energy analyst. He feels there could be some upside left even as the pricing and valuation aspects of the Reliance Power IPO unfolds.
The information technology index had its sharpest rise on Wednesday, over 4 per cent, as Infosys gained ahead of its second-quarter results scheduled for October 11.