Sensex above 10k

THE slew of policy measures announced by RBI on Saturday had a positive impact on the market. Combined with positives cues from Asian markets, equity benchmarks extended their winning streak on Monday, closing above psychological levels, but most market participants are viewing it as nothing more than a relief rally. Provisional data showed foreign institutional investors as being net buyers for the second day in a row. However, given the gloomy mood — both in the domestic economy as well as globally — it remains to be seen if these inflows can sustain long enough for the indices to climb back to respectable levels. It is too early to say if mutual fund inflows are tapering off, though there are signs that local investors’ patience is wearing thin. FIIs net bought Rs 363 crore worth of shares, while domestic institutions were net sellers of Rs 97 crore of shares.
Also, Monday’s gains have to be viewed in the context of combined traded turnover, which was around Rs 48,000 crore. Traded turnover in the derivatives segment was less than Rs 35,000 crore, an unusually low figure for the early part of a settlement cycle. The 30-share Sensex closed above 10,000 for the first time in nearly two weeks, rising 549.62 or nearly 6% to close at 10,337.68. The 50-share Nifty closed above 3000, gaining 158.25 points to end the day at 3043.85.
In the currency market, RBI’s move of easing rates last week made an impact, as the rupee fell below 49 to the dollar and call rates cooled down to around 7%. RBI cut the key repo rate by 50 basis points and reduced CRR and SLR by 100 basis points each on Saturday. Its primary aim was to improve liquidity though the impact on the equity market has been positive, at least in the short run.
India was the best performer among key Asian markets. Hong Kong, South Korea, Taiwan and Singapore were up between 1% and 5% while Japan was an exception to the trend, shedding 5%. European markets were mixed, with the European Commission stating that the region’s economy may have already entered a recession this year, and predicting that it would stagnate in 2009. And the steep plunge in commodity prices has led many analysts to forecast that the US may be headed for its longest recession in over two and a half decades.
There were positive developments though, as the three-month London inter bank offered rate (Libor) — the cost of borrowing in dollars in London — fell on hopes of further rate cuts by the European Central Bank. The three-month Libor rate fell to a one and a half month low of 2.86%.
Back home, realty stocks were the star performers, with the BSE Realty index shooting up over 8% to close at 2142. Brokers continued to remain sceptical on the sector though as companies are facing a severe cash crunch, prompting many of them to go slow on new projects and reduce prices in case of already developed projects.
Other strong performers included capital goods and banking sectors. Infrastructure firms L&T and Jaiprakash Associates were up 10-13% while SBI surged 12%.