MUMBAI, APR 19: After the slump on Saturday, the stock markets across the country bounced back again as buyers led by financial institutions returned to trigger a recovery in share prices on Monday. With the markets expecting the Union budget to be cleared on April 21, the Bombay Stock Exchange Sensitive index (Sensex) rallied by 124 points, thereby halting the bear run on the markets. However, the rupee took a severe beating and crashed below the 43 level before closing at 42.85/87 against the US dollar at the foreign exchange market.The stock market sentiment turned for the better on reports that a possible constitutional and financial crisis was averted with all political parties arriving at a consensus to pass the Union and railway budgets without discussion in Parliament this week. Earlier, industry and the capital markets were worried about non-passage of the Finance Bill due to last week's political crisis that led to fall of the Vajpayee government, causing a crash in Sensex by 245 points on April17.``Reassurances from various political parties that the Finance Bill would be cleared irrespective of which party forms the government provided the much needed edge to the institutional bulls. This news also pepped up the sagging market sentiment which took a beating on Saturday,'' said a fund manager, adding, ``the government cannot afford to ignore the budget.''Sensex, which moving in a highly volatile manner in the last ten days, recovered smartly from the opening level of 3331.71 to the intra-day high of 3468.05 before closing at 3451.43 with a sizeable gain of 124.45 points as against last Saturday's close of 3326.98. The BSE-100 index recovered sharply by 51.36 to 1495.92 from previous close of 1444.56. On the National Stock Exchange, the S&P CNX Nifty index also gained sharply by 26.95 points to 993.90 from the previous close of 966.95.Financial institutions, who were not very active on Saturday, bought shares heavily. Foreign institutional investors (FIIs) also lent support by acquiringshares of Hindustan Lever, ITC, Britannia and Rhone Poulenc. The scrips which posted 7-8 per cent gains were ACC, Global Tele, Digital Equipment, Hind Ink, Zee Telefilm, BPL and Ranbaxy.Further, Congress president Sonia Gandhi's statement that her party would form an alternative government at the Centre also brought some relief to the players. Ten specified shares including Cummins Ind, Mahindra, BPL Ltd, Zee Telefilm and Finolex Cables hit the upper price band after exhausting the daily limits. Reliance attracted huge buying support as the company's board meeting shortly to finalise the financial results.On the other hand, the rupee crashed to 43.10 against the dollar as the spillover effect of the BJP-lead coalition government losing a vote of confidence on Saturday hit the market. A statement by the Congress that it will offer support to get the Union Budget for 1999-2000 passed without any amendments saw the rupee recover to close at 42.85 gripped the forex market this morning whenit opened for trade, as the specter of uncertainty raised by the collapse of the 13-month old BJP-led government spurred operators to rush to cover dollar positions, which put the rupee under tremendous pressure, dealers said. Opening the day at a wide 42.85/95, lower from its Friday's close at 42.71/72, the rupee went to its day's low of 43.10 as the market was caught in an initial half-an-hour of dollar-bidding frenzy. "There could have been the possibility that a few banks went short on the dollar on Friday hoping that the BJP-lead coalition government would survive the confidence vote the following day might have rushed to cover their positions in early trades," dealers said.The rupee started gaining from 42.10 levels to 42.78/80 as a Congress statement that it would co-operate in the passing of the Finance Bill filtered into the market, before slight dollar demand towards close of trades pulled it down to 42.85 Dealers said that the State Bank of India sold dollars at around 42/89 levels, by whichtime the rupee had already recovered from its early lows.The rupee had last pierced through the 43-dollar mark in late August last year. It had nosedived to an all-time low of 43.48/53 at the close of business on August 19, 1998 following a plunge to an historic intra-day low of 43.60/65 due to all-round hectic demand for dollars, forcing the central bank to intervene and initiate a series of measures to halt the slide.``As corporate demand emerges, we could see the rupee weaken further, but with the credit policy due on Tuesday, the Reserve Bank of India (RBI) may not allow a free fall," dealers said, adding that the central bank could hold back moves to cut banks' cash reserve ratio - expected to be announced in the monetary policy by several bankers - if the rupee came under sharp pressure.
