Joining a global market rally,the Sensex on Friday surged by 337 points,its biggest single day gain in two months,on heavy buying after the European Central Bank unveiled a new plan to buy troubled euro zone nations bonds in a bid to tackle the regions debt crisis. The Sensex ended at a two-week high level of 17,683.73,up 1.95 per cent,and the NSE Nifty Index gained 1.98 per cent at 5,342.10.
This is the best single day performance since June 29 when the Sensex rose by 439 points. Capital goods stocks were among the best performers on the back of foreign funds flow while realty,banking and metal stocks were also among the major gainers.
The bullish sentiment,fuelled by ECB chief Mario Draghis announcement,was increased by US data showing many more jobs than expected were created in the private sector last month,lifting hopes for the worlds number one economy. Tokyo surged 2.20 per cent,Seoul climbed 2.57 per cent and Sydney rose 0.30 per cent. Hong Kong jumped 3.09 per cent and Shanghai soared 3.70 per cent.
Kishor P Ostwal,CMD,CNI Research,said,ECB bonds buying sparked global rally which allowed Indian market open gap up. The market rallied post 300 points once S&P said that India downgrade plan is not there.
Dipen Shah,Head of Private Client Group Research,Kotak Securities,said,ECB will buy unlimited amount of bonds,if countries request it to do so,subject to conditions. This means that the prospect of defaults by sovereigns has reduced in the EU. That supported the markets. However,the ECB has also indicated that the bond buying will be sterilised. Thus,no additional liquidity is expected to flow through the global markets because of these proposals.
FII inflows can only lift Indian markets up to a point. What they badly need is the fuel of reforms,which has been in short supply during the UPA regimes. The fuel price hike buzz is back but it has been around for some time now as the government lacks courage in taking bold steps. PSU disinvestment remains in a limbo even as the Centre struggles to launch other reforms. The short point is that the FII-powered rally will face hurdles if the government fails to act, said Amar Ambani,Head of Research,IIFL.