Sensex fails to hold on to 10k

THE season of bad news seems to be far from over, even as governments and central banks are trying everything possible to limit the damage to their respective economies.

In the US, the unemployment rate for October rose 40 basis points over the previous month to a 14-year high of 6.5%. In the past couple of months, 5.2 lakh works have been laid off, the biggest two-month job cuts since 2001. A foreign news agency reported that automobile majors GM, Ford Motor and Chrysler have sought a $50-billion bailout package to help them ride the worse slump in the auto market in nearly 25 years. The US equity market appears to have discounted these developments, with the Dow Jones Industrial Average quoting slightly higher in early trade. Key markets in Asia — with the exception of Japan — ended higher, while European markets ended mixed. Amid the gloom, there were some indications that the liquidity infusions by various central banks is gradually taking effect. The 3-month Libor — the cost of borrowing dollars in London — fell to a 4-year low, in response to reduction in benchmark lending rates, globally.

In India, equity benchmarks rallied over 2% on Friday, but on thin volumes, reflecting the cautious mood among investors. The 30-share Sensex ended the day at 9,964.29, up 230.07 points, or 2.4%, over the previous close, after having touched a high of 10,065.37 intra-day. The 50-share Nifty ended the day at 2,973 points, up 80.35 points, or 2.8%, over the previous close.

Combined traded turnover on both exchanges was around Rs 48,000 crore. This is the third time this week that it has been less than Rs 50,000 crore. The upswing on low volumes indicates that stock prices rose in the absence of any major selling pressure. Institutional activity was lacklustre; FIIs were net sellers of Rs 19 crore worth of shares, while local institutions net-sold Rs 147 crore worth of shares.