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ShareMumbai: Kaat kaat! Kaat daal! Jaldi!
The sound of panic buying -- to cut losing short positions -- reverberated across brokerages on Wednesday, less than 24 hours after the Sensex vigorously shed 491 points in a bout of panic sales.
And in the aggressive veer-back, the index regained every inch of lost ground and then some.
The huge short squeeze was the main reason for Wednesday's pullback, said experts.
Strong global cues ahead of an announcement by the US Federal Open Market Committee (FOMC) helped, too.
"We had entered oversold territory both price-wise and position-wise. There were a lot of shorts that got covered in today's trade. There has also been cash-based buying, which has boosted markets," said Siddharth Bhamre, head, investment advisory and derivatives, Angel Broking.
Nipun Mehta, executive director and head of SG Private Banking India, agrees. "Short covering and domestic buying contributed to the rise on Wednesday."
Provisional data from the National Stock Exchange show domestic institutions bought shares worth Rs 557.19 crore, while foreign institutional investors were net buyers by Rs 234.31 crore.
The Sensex gained 507.19 points to close at 15,912.13.
Sectors that swing a lot -- or the 'high beta' lot -- rebounded as fast as they had fallen.
Realty and metals, the top two losers on Tuesday, were the major gainers on Wednesday. They were up 9.65% and 5.36%, respectively.
Global markets, especially in Asia, were supportive of the upmove. The Hong Kong index Hang Seng, was up nearly 1.76%, while the Korean Kospi rose 1.94%. European markets were also in positive territory.
"The Indian market has been closely tracking the Hang Seng and we had been underperforming over the last 10 days. A positive cue from the index has pushed the local markets higher," said Bhamre.
The Sensex had lost 1921.07 points over the last 10 days, taking cues from the second-quarter results of corporates and policy signals from the Reserve Bank of India.
"The results have not been encouraging and signals sent out by the RBI as well as interest rate cuts by Australia have had an impact on sentiment. Markets have been jittery as the economic recovery is still fragile," said Waqar Naqvi, CEO, Taurus Mutual Fund.
There is still an absence of local cues, but any change in policy abroad would likely have an impact in India, experts said.
"Quite a bit would depend on the Federal Reserve," said Mehta, who is bullish on banking and capital goods.
"We can't say that we are out of the woods yet. Now, levels of 4700-4770 would be strong resistances. The FOMC meet will be crucial in deciding immediate direction," said Ambareesh Baliga, vice-president, Karvy Stock Broking.
The FOMC began its meeting on Tuesday and is expected to announce a decision on interest rates on Wednesday afternoon in the US (late night, India).*
