MUMBAI, June 17: The stock markets rose like a phoenix from the ashes on Wednesday as the Sensex (BSE sensitive index) staged a scintillating recovery of 240 points, thanks to the SEBI's decision to impose a partial ban on short sales. The record gain in Sensex has finally brought relief to the markets which were falling since the middle of last month.While sensex closed at 3400.95 on the Bombay Stock Exchange, the NSE-50 index of the National Stock Exchange also recovered by 66.40 points to 976.50. Other exchanges in Calcutta, Delhi and Madras also rallied. The rally came even as the stock exchange and SEBI officials were engaged in hectic efforts to avert a payment crisis.The single major factor which reversed the market trend was the ban on short sales. SEBI has made it mandatory that all outstanding sales positions should result in delivery at the end of a trading day with effect from June 17. This means bear operators will not be able to go on making short sales."The market was so far in thegrip of bear operators who were selling shares without taking delivery. As a result of the ban on short sales, the market went only in one direction today. As there were no sellers, buyers pushed up the index," said a market source.Market sources said bear operators were left with no choice but to cover 50 per cent of their short sold positions before the weekend. The bull rally gained momentum as financial institutions led by UTI made fresh purchases in index-based scrips like TELCO, Tisco, ITC, Reliance, Larsen and SBI. Over 40 scrips in the forward group and majority of software scrips hit the circuit breaker after exhausting the 10 per cent daily upper limit. Videocon international and BPL India - the counters of Harshad Mehta - fell as there were no buyers for these scrips.Experts feel that the index is likely to stabilise around 3,400-3500 level for the time being. "If the exchanges manage to avert the payment crisis, the market would rise further. Brokers facing payment problems in the BPLscrip have been bailed out as the BPL officials have agreed to buy the outstanding position in the scrip," said a broker. It is learnt that both BSE and NSE are likely to use around Rs 35 crore from the trade guarantee funds to meet the payment problems.Similarly, brokers involved in Videocon and Sterlite are also likely to be bailed out and hectic efforts are going on to sort out the problem. The ITC scrip zoomed by Rs 61.50 to Rs 678.50 on brisk buying support on Wednesday. Reliance gained Rs 10 at Rs 155, SBI Rs 19.40 at Rs 213.60, Hindustan Lever Rs 119.25 at Rs 1632, Telco Rs 15.30 at Rs 198.40, Tisco Rs 8.90 at Rs 134.40 and Satyam Computer Rs 32.75 at Rs 362.25. ACC gained Rs 111, Grasim Rs 21, Hindalco Rs 59.75, Larsen Rs 21.10 and Glaxo Rs 20.75 on short covering. However, BPL India dipped by 18.50 to 229.70 and Videocon International by Rs 6.75 to Rs 83.65.
