Stock market indices continued to tease investors, this time by executing the biggest pullback ever in absolute terms.
MUMBAI: The premier stock market indices continued to tease tormented investors, this time by executing the biggest pullback ever in absolute terms, stanching the bleeding seen in the previous three sessions.
Rewriting its own record struck last Friday, the Bombay Stock Exchange Sensex shot up by 615.62 points, or 6.89%, to close at 9545.06 points.
Last Friday, the Sensex had gained 515 points. It had shed 881 points till Wednesday.
"I think it is basically a combination of short covering, value buying and bottom pick-up. So, it has a bigger chance of surviving tomorrow. Today, market had a larger proportion of institutional activity. The leverage and the speculative components of the market have come down," said Rajesh Jain, director of Pranav Securities, a leading stock brokerage firm in the city.
Deepak Mohoni of trendwatchindia.com said Thursday's rally was a strong one, and was backed by solid moves from other global markets.
"The best case scenario now is that we may get into an intermediate (medium term) uptrend. Such an uptrend will be confirmed if the Sensex crosses 9,860. This would be very likely if global markets remain firm."
If an intermediate uptrend is confirmed, it is unlikely to last more than two weeks since this is a bear market, Mohoni said.
"Though the gains in such an uptrend could be quite good from the current levels, stocks will generally fall well short of the peaks they had attained in May. This is because we are in a bear market, and intermediate trends tend to have declining tops and bottoms. The worst case scenario is that Thursday's move turns out to be a single-day rally like we saw last Friday, in which case the decline would simply resume on Friday."
The gains snapped a 3-day slide, helped mainly by gains ramped up by index heavyweights such as Infosys. Many market players felt the losses clocked in the past three days were "excessive", and the surge was attributed to some value picking and short covering. Asian markets, too, rallied as analysts recommended buying shares in select sectors.
"There was a healthy correction to a bull market and yesterday we had hit an intermediate bottom. Today's move was due to FII and domestic institutions' buying, though prices were amplified with many buyers against very few sellers. Funds that were on the sidelines have started taking positions and are awaiting quarter numbers and monsoon-effect. It is basically a bull market and I think the Sensex would move in 9,000-10,500 levels in the near term," said Dinesh Thakkar, chairman and managing director of Angel Stock Broking.
Irrespective of today's Sensex claw-back, traders and analysts do not rule out see-saw movements in the future.
"Volatility is still there in the market and it is very difficult to take a call at this point. People will be unwinding positions and doing bargain hunting at good valuations. But the correction has been significant and we are back at fairly reasonable valuations. The markets would sway in the 8500-10000 range, but again, till when is the big question," opined Shashi Krishnan, chief executive of DBS Cholamandalam Mutual Fund.
The trend in the local markets is not an isolated instance. "We've had a correction and shares now looking quite reasonable again," said Rohan Walsh.
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