Sensex walks out on Asia, marries Europe
Indian stocks opened slightly positive on signals from the overnight US market but really took off once European bourses reported gains on Wednesday.Updated: Jul 02, 2008 22:10 IST
Indian stocks opened slightly positive on signals from the overnight US market but really took off once European bourses reported gains on Wednesday. The rise in Indian stocks became sharper towards the end of the session as people who had gone short — sold stocks or contracts without owning them — had to buy them back to minimise losses.
European shares shrugged off sharp losses in Asia, including the worst losing streak in 43 years in Japan, and put in gains while the euro rose ahead of an expected interest rate hike.
“I would say short covering was the major reason for the recovery and there was a small amount of buying by investors,” said Jignesh Desai, head, institutional sales, SBICAP Securities.
Just a day ahead of the European Central Bank’s meeting to decide on interest rates, the UK's benchmark index FTSE was up 60 points on a surge in the value of banking stocks. The impact of the ECB action on the US dollar is crucial as it will also affect crude oil prices, according to analysts.
Although Hong Kong's Hang Seng and Japan's Nikkei closed 397 and 176 points lower, respectively, Indian markets chose to ignore the weakness in Asia.
Japan's Nikkei average fell 1.3 per cent as worries about the global economy hit exporters such as Canon Inc. The loss marked its 10th straight negative day, its longest losing streak since February-March 1965. The Nikkei lost 176.83 points to end at 13,286.37, the lowest close since April 16.
"There is pessimism in the market and that is reflected in stocks trading at a discount. Unless the discounts turn into premiums I don't think the correction is over," said R Sreesankar, head of research, IL&FS Investmart. Stocks as well indices like the Nifty are trading at a discount to the cash market price in the futures market. “I would think 3,800 is the short-term bottom for the Nifty and the markets would consolidate once there is a clarity on the Indo-US nuclear deal,” Desai said.
Volatile European stocks were buoyed by Deutsche Bank, which said it expected to make a profit in the second quarter of the year and therefore did not need to turn to shareholders for extra cash. This bucked the early international trend.