Global hopes push up Sensex to 2009 high

Joining a global market rally,the Sensex rallied nearly 5 per cent on Friday to post its biggest rise in three months...

Written by ENS Economic Bureau | Mumbai | Published:March 14, 2009 12:48 am

Joining a global market rally,the Sensex rallied nearly 5 per cent on Friday to post its biggest rise in three months,as hopes for a recovery in the battered US banking system boosted investor confidence across the world. Chinese Premier Wen Jiabao said the country had made plans to inject more stimulus into its economy if needed even as Citigroup Inc chairman Richard Parsons said that the bank did not need any more capital injections from the government and expressed confidence that Citi would remain in private hands. The 30-share BSE Sensex rose 412.86 points to 8,756.61,its biggest one-day percentage gain since last Dec 10,on strong buying by foreign funds and domestic institutions.

Foreign investors who were big sellers in the last a few weeks bought stocks worth Rs 300 crore on Friday. Traders were so far concerned about the FII sell-off this year. They have pulled about $2.3 billion from Indian stocks since the beginning of January,adding to more than $13 billion they sold in 2008. Domestic institutions also bought stocks worth Rs 684 crore on Friday.

The benchmark index firmed 5.2 per cent in the holiday-shortened week,its best weekly rise since late January. The 50-share NSE index closed up 3.9 per cent at 2,719.25.

Analysts say the market may be near a bottom,but more evidence was needed for a decisive turnaround. The Income Tax department’s optimism that the fourth tranche of advance tax payments of India Inc,due on March 15,2009,will be healthier than the previous one,also lifted sentiment.

Key benchmark indices in Hong Kong,Singapore and Taiwan were up by between 3 per cent and 4.37 per cent. Japan’s Nikkei 225 index jumped 5.15 per cent on speculation the government will introduce additional stimulus measures to lift the sagging economy.

Analysts said it was a typical bear market rally. “Financial stocks are showing some stability. A sharp slide in inflation over the past few months provides room for the central bank to cut policy rates further,” said a dealer.

Meanwhile,the rupee also appreciated sharply by 35 paise to close at 51.51/52 against the dollar. The local unit opened firm at 51.70/71 per dollar from the previous close of 51.86/87. It moved in a range 51.44-51.78 before concluding the day at 51.51/52,a smart rise of 0.67 per cent over the last close.

Guideposts for investors

• For new investors with a long-term view,experts suggest investments in large-cap stocks in a staggered manner

• Old investors can look at churning their portfolios. They can buy good quality blue chips

• There could be another 500-1,000 point upward streak in the Sensex in the next week or maybe the fortnight

• Besides the positive global cues,some good news at home is likely to support the markets and prevent it from touching new lows

• Rabi crops are expected to do well and this could in turn bring in good news for rural economy and support demand

• From April 2009 onwards,we could see a positive IIP figure

The Pre-poll pangs

Historically,markets tend to be lacklustre during the two-month period preceding the elections,suggests a research report from Edelweiss Capital. Markets tend to be down before elections because there is uncertainty regarding which formation will come into power,and what its policies will be

ELECTION YEAR Return

1980 -2%

1984 0%

1989 -4%

1991 1%

1996 10%

1998 4%

1999 3%

2004 2%

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