Global cues, short covering drive Sensex 349 points higher
Indian equity benchmarks showed remarkable performance on Wednesday, with the Sensex adding nearly 350 points supported majorly by strong global cues, tracking strong quarterly numbers from technology companies
April 20, 2011 / 16:57 IST
Indian equity benchmarks showed remarkable performance on Wednesday, with the Sensex adding 349 points supported majorly by strong global cues, tracking strong quarterly numbers from technology companies. Short covering was another reason that led the rally as index had fallen about 600 points in previous sessions.
The 50-share NSE Nifty surged 110.90 points or 1.93%, to close at 5,851.65 - helped by 48 shares out of 50 on the index. Experts feel that today's rally was quite surprising. The movement or the pace of the movement, Anil Manghnani of Modern Shares & Stock Brokers says, is a little surprising. "Maybe we are still within that well defined range of 5650 on the downside and about 5950 on the upside - what it might oscillate in since we had a great rally into earning season is that a lot of the good news or a lot of the expectations from the results are already priced in. Now the market would tend to react to extremely better than expected results like a HCL Tech or as surprise on the downside like Infosys," he said.Spurt in global markets bolstered the momentum in Indian equities - technology sector was the leading star especially after the better-than-expected January-March quarter numbers from IBM and Intel. That rejoiced the mood in Indian technology companies' shares too.TCS shot up more than 4.5% ahead of fourth quarter numbers on Thursday. Investors and traders jumped on to the stock - may be taking cues from strong set of numbers from HCL Technologies. Now everyone forgot the poor quarterly performance of Infosys.Rajan Malik, Head equities, Private client group, MF Global believes that TCS should come out with a good performance. "Unfortunately, Infosys did create some kind of a surprise and I would say a shock, but TCS should do well and especially expectations would have gone up today based on what HCL has done. And we know for a fact that TCS has been performing better on a relative basis than Infosys for a sometime and we believe that, that should continue tomorrow."According to CNBC-TV18 estimates, TCS is set to report 4.2% growth in fourth quarter net profit of Rs 2,340 crore as against Rs 2,330.17 crore in previous quarter.HCL Technologies gained nearly 10% as it reported 17.1% growth in fourth quarter net profit of Rs 468.2 while the street expected at Rs 430 crore. Wipro gained 3% and Infosys was up just 0.6%. Heavyweight Reliance Industries too is going to declare its January-March quarter numbers on Thursday. The stock gained 1.4% and ONGC jumped 2%.On the global front, European markets like France's CAC, Germany's DAX and Britain's FTSE were trading 2-3% higher. US futures participated too - Dow Jones and Nasdaq futures gained more than 1%. Asian market ended with 1-2% gain while only Shanghai went up just 0.3%.Short covering was another reason behind today's rally. The Nifty April Futures shut shop at 5874 with 6% addition in open interest. Nifty futures ended with 22 points premium. Nifty 5800 Call was the most active call in today's trade on back of short covering. Strike prices from 5600 to 6000 call saw shedding of open interest. On the other hand, Nifty 5800 Put saw 43% addition in open interest. The volatility indicator, India VIX was down 5% at 20.99, a positive sign for bulls.The 6000-6100 is just about 4-5% away and may be a good result in TCS can result in 1-2% rally tomorrow itself, says Rajan Malik, Head equities, Private client group, MF Global. "I am not saying it will happen but it could happen. One must ride the momentum for now and then at higher positions may pair to take stocks of the headwinds, because ultimately in the medium-term these headwinds will play their part. One can
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