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U-turn on D-Street

Equities closed in the black for the first time in three days with the Sensex recording the biggest single-day gain of 702.94 points, or 5.42 pc in three months. HT reports.
Hindustan Times | By HT Correspondent
UPDATED ON JUL 03, 2008 02:39 AM IST

Equities closed in the black for the first time in three days on Wednesday with the Sensex recording the biggest single-day gain in three months.

Starting the day on a flat note, indices gained momentum towards the latter part of the day, taking a cue from strong European markets as investors bought stocks at lower levels while traders covered their short positions. Short covering is process in which an investor who sells stocks or futures contracts that he doesn't own in the open market buys them back.

Realty stocks that had been the worst hit in the recent market fall led the bounce-back on Wednesday as investors went bargain hunting on the counter. A weaker rupee saw good buying in information technology stocks.

"The markets had seen huge amounts of short positions built up and were in an oversold position. Today's temporary pullback is mainly due to short covering and value-based buying at lower levels. There was good buying from the foreign institutional investors as well," said Rajesh Jain, CEO of Mumbai-based Pranav Securities.

While the benchmark Sensex of the Bombay Stock Exchange gained 702.94 points, or 5.42 per cent, to close at 13,664.62 points, the wider Nifty of the National Stock Exchange jumped 196.6 points, or 5.05 per cent, to end the day at 4,093.35 per cent.

Key equity indices had lost around 10 per cent in the last three sessions with the Sensex closing Tuesday at a 15-month low of 12,961.68 points.

Besides short covering and value buying, what fuelled Wednesday's rally on the bourses was the depreciation of the rupee against the dollar and expectations of a higher earnings growth in export-oriented companies. Further, there is an unsaid feeling growing among investors across the globe that crude oil prices are likely undergo a correction in the near future.

"With the rupee weakening from 39-odd to a dollar and inching towards the 44-mark, infotech stocks look attractive. Crude oil prices seem overblown as the demand-supply equation does not justify such high prices," said Madhavi Vora, Managing Director of ULJK Securities.

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