Short covering propels Sensex by 646 points
Mumbai: Led by a massive short-covering rally in financial sector stocks, Sensex and Nifty-50 gained 1.7 per cent on Wednesday, after six consecutive sessions of decline. The big gain also came a day before the start of the second quarter earnings season to be kick-started by Tata Consultancy Services and IndusInd Bank, but the IT stocks ended as lone sectoral losers.
The Sensex gained 645.97 points, or 1.72 per cent, after a weak start and closed at 38,177.95. The broader Nifty-50 Index gained 186.90 points, or 1.68 per cent, closing at 11,313.30.
'The market bounced back today after the steep fall of 4 per cent in the last six trading sessions, partly due to the short covering. The Union Cabinet approved increase in dearness allowances by 5 per cent, taking it up from 12 per cent earlier to 17 per cent, thus benefitting over 1 crore government employees and pensioners, which may boost consumption. Banking and NBFC stocks witnessed biggest gains followed by Metal, Auto, Cement and Pharma stocks,' said Siddharth Khemka, Head-Retail Res-earch, Motilal Oswal Financial Services.
The market expects better days ahead as the festive season demand has begun on an optimistic note. According to reports, e-com sales led by Amazon and Flipkart were worth Rs 19,000 crore in six days, which led to value buying in the beaten down names.
'The earnings season will also likely be another tepid one. Thus, instead of the quarter's numbers, the market would be tracking the commentaries of the corporates on underlying demand post the recent government measures,' Khemka said.
But worries remain about the sustainability of market's upward move as foreign portfolio investors were net sellers by Rs 485.24 crore and buying came mainly from the domestic institutions, who were net buyers by Rs 956.26 crore, as per the provisional data.
A report by HDFC Institutional Research on the health of economy said: 'At least a significant chunk of the Indian economy is slowly picking itself up after a few mishaps. The pain persists and healing will take time. But the confidence on longer term trajectory is not broken at all... There is a broad based slowdown in consumption and consumer confidence that is unlikely to be revived with a mere tax cut. While we remain confident on the longer term trajectory for Indian macros, there is strong evidence of a sticky slowdown that merits policy actions.'