Markets volatile, Sensex see-saws 412 pts intra-day

The National Stock Exchange also showed a similar trend and the NSE Nifty Index ended up 1.17 per cent, or 15.05 points, at 1,297.85. Brokers said select foreign fund buying had driven the market up in afternoon trade, after most stocks had opened weak. A leading bull who was at a low key in the last one month also stepped in and purchased ICE stocks.

Leading gainers include Zee Telefilms up by 9.19 per cent at Rs 525, HCL Technologies up by 8.25 per cent at Rs 1,275, Silverline Technologies up 10.23 per cent at Rs 391. Infosys, Satyam, Wipro, Pentamedia and Digital also recovered their earlier low levels. In fact most of the ICE stocks had fallen by 12 per cent in the morning session, but recovered substantially later following FII and speculative buying.

Apart from this, as the market was in an overbought position, there was short covering as well. "It’s mainly a speculative pull-back. I’m not convinced about the sustainability of the recovery. The huge volatility is keeping away retail investors," said one dealer. The recovery was led by shares which have huge outstanding positions.

Dealers said some funds were sitting on cash and there were hopes they might look at bargain opportunities, but there was no clear indication they were actually buying. When the Sensex dipped below the 4000-mark on Monday for the first time in the last 11 months, stocks immediately came under strong selling pressure. As a result, a large number of software stocks dipped to their 8 per cent lower limit in the first half an hour. However, recovery set in at around 11 am, and continued for the remaining part of the day. Stocks like ITC, HLL, Satyam Comp, Zee Tele and Infosys helped the sensex to show a recovery from the low levels.

Fears of a drop in foreign flows and disappointing earnings from Zee Telefilms, one of the hottest stocks, had pulled down Sensex by 12.5 per cent on a weekly basis, the sharpest fall this year. In point terms it was also the biggest at 586.74, eclipsing the earlier fall of 515.13 points for the week ending April 23.

Analysts feel the recovery will depend on Tuesday’s meeting of the United States Federal Reserve which is widely expected to raise interest rates. The index has now lost 30 per cent since its closing high of 5,933.56 points on February 11 this year. Absence of institutional buying, a fall in confidence and bearish technical signals are likely to weaken the index gradually to 3,600-3,800 levels within the next fortnight, brokers said.

After a strong showing in April with $557.9 million net equity purchases, net foreign fund inflows have slowed down in May. Data released by the Securities and Exchange Board of India (SEBI) showed foreign funds were net sellers in the last four days of last week, sparking fears they may trim exposure to India. "There are no strong drivers now," said an analyst, saying shares would remain volatile until the Federal Reserve meeting.

“Technically, the market is looking very weak. Any rally will be short-lived as no buyers are emerging,” said an NSE dealer. Analysts said a revival can only be sustained if ICE stocks firm up and sustain gains. Most of these shares have been big-time losers since the global correction in new economy stocks set in March.