Markets have witnessed a sharp pullback rally on the back of short covering and strong global cues, after a severe crash in the last week. Benchmark indices have broken five-day losing streak and ended on a strong note. This rally was largely led by beaten-down banking and capital goods stocks followed by realty, power, telecom, technology and metal stocks. The Sensex ended above the 11,000 mark while the Nifty clawed back above 3500 during the day but failed to close above that level.

Central banks and governments globally are giving first preference to credit crisis and are trying to solve liquidity problems. Governments addressed core issues by guaranteeing inter-bank liquidity and guaranteed debt issued by banks to encourage lending and ease credit crunch.

The Australian, New Zealand and other South East Asian governments have guaranteed bank deposits. US Treasury Secretary Henry Paulson is considering guaranteeing debts issued by banks after USD 700 billion package.

The United Kingdom (UK) government is taking direct stakes in the banking system by buying preference shares. The Royal Bank of Scotland (RBS), HBOS and Lloyds TSB will get USD 64 billion of government investment.

Gordon Brown, Prime Minister of the United Kingdom, announced the government extending a GBP 37-billion (USD 64 billion) lifeline to UK banks. Brown said he spoke to US President George W Bush and the two leaders had agreed on common ground for action to deal with the global financial crisis.

As part of the break-up, RBS, HBOS and Lloyds TSB will raise GBP 20 billion, GBP 11.5 billion and GBP 5.5 billion respectively. Meanwhile, Lloyds TSB has revised its merger terms for taking over HBOS.

European markets were trading smartly on hopes that the credit crisis would be resolved soon; FTSE was up 4.89%. CAC and DAX rose 6.5% each, at 3:50 pm. Dow Jones and Nasdaq Futures were up by 4.36 and 4.7%, respectively.

Asian markets also recovered sharply in late trade. Shanghai rose 3.65%, Hang Seng 10.24%, Kospi 3.79%, Straits Times 6.57% and Jakarta 0.7%. However, Taiwan closed lower by 2.15%. Japanese's Nikkei was shut today for the Sports Day holiday.

Indian markets saw benchmark indices react very strongly to these global cues and recovered most of Friday's loss.

The Sensex closed with a gain of 781.24 points or 7.42% at 11,309.09, after hitting an intraday high of 11,361.32. The Nifty jumped by 210.75 points or 6.43%, to settle at 3490.70. It has hit an intraday high of 3510.20.

Fresh long build up was seen in Nifty Futures in today’s trade. It added nearly 33.5 lakh shares and ended at a premium of 62 points. Fresh longs build up was also seen in banking stocks; ICICI Bank was the leader. IT stocks saw mild long build up.

Among the frontliners, Reliance Communication, Reliance Infrastructure, ICICI Bank, Sterlite Industries, Cairn India and Suzlon Energy shot up 15-19%. HDFC Bank, SBI, BHEL, Mahindra & Mahindra, Larsen & Toubro, Hindalco, TCS, Idea Cellular, GAIL and Unitech were up 10-13%.

However, Ranbaxy Labs lost 5.59% and Zee Entertainment fell 4.5%. ONGC, Sun Pharma and NALCO went down 1-2%.

Finance Minister P Chidambaram said the root cause of uncertainty was liquidity and that there were no fundamental worries, and expressed confidence in the steps taken by the Reserve Bank of India to ease liquidity pressures. He pointed out that Rs 91,000 crore has been accessed via the LAF window.

Turnover traded was very low in today's session, stood at Rs 56,131.77 crore. This includes Rs 11,550.77 crore NSE cash segment, Rs 40,624.27 crore from NSE F&O and balance Rs 3,956.73 crore from BSE cash segment. 

Market breadth was positive throughout the day; about 1839 shares have advanced while 1136 shares have declined. About 209 shares remained unchanged.

BSE Bankex outperformed other indices, rose 654.34 points or 12.30%, to settle at 5,973.84. Banking stocks were the real drivers of this rally. Axis Bank went up 20% on strong second quarter earnings; the bank's standalone net profit was up 76.85% at Rs 402.91 crore and net interest income rose by 55.17% at Rs 913.47 crore on YoY basis.

ICICI Bank closed up by 17%, after bank's clarification. KV Kamath, Managing Director and CEO, ICICI Bank, said that ICICI Bank is very well-capitalised at 150% of the requirement. He added that the bank is among the soundest financial institutions in the world.

Kamath clarified that there has not been any drastic decline in deposits in the last three weeks. He said their morale will remain high, and that the bank will continue to fight for its customers. He added that call rates had gone up to 22–24% due to high liquidity crunch and the long-term shareholders have not sold any stocks recently. He further said that no senior management has sold shares in the last nine months.

IDBI Bank, HDFC Bank, SBI, Yes Bank and Bank of Baroda were up by 10-14%.

BSE Capital Goods Index shot up 793.08 points or 9.93% to 8,776.12, due to buying in Crompton Greaves, BHEL, Larsen, ABB and Punj Lloyd, which rose 10-12.5%.

Power stocks also charged up. Reliance Infrastructure and Suzlon Energy were up by 15-17%. CESC rose 12%. NTPC, GMR Infra, Reliance Power and Torrent Power gained 4-8%. Index jumped 161.63 points or 8.71% to 2,016.67.

Realty index went up by 231 points or 9.16% to 2,754.07. HDIL and Indiabulls Real were up 21.5-24%. Parsvnath, Sobha Developer and Unitech rose 10.5-15%.

Telecom stocks like Reliance Communication surged 19.23% followed by Idea Cellular with a gain of 13.55%, Bharti Airtel 7.33%, MTNL 7.28% and Tata Communication 6.01%.

BSE IT Index shot up 206.17 points or 7.98%, to settle at 2,790.42. Patni Computer, TCS, Infosys, Wipro and Satyam were up 8-11%.

Metal stocks were also shining. Sterlite Industries, JSW Steel and Hindalco rose 11-16%. Tata Steel and SAIL were up over 5.5%. Metal Index gained 444.46 points or 6.79%, to close at 6,987.03.

Auto stocks like M&M rose 11.4%. Escorts, Maruti Suzuki, MRF, Cummins and Bharat Forge were up 5-7%. Tata Motors and Hero Honda and Ashok Leyland gained 1.5-2.5%. Auto Index went up 159.97 points or 4.91% to 3,415.65.

FMCG Index rose 64.88 points or 3.49%, to settle at 1,925.43. GlaxoSmith Consumer shot up 10%. Godrej Consumer, Tata Tea, United Spirits, HUL, United Breweries and ITC were up 4.4-5.6%.

Oil stocks like Cairn India shot up 17.5%. GAIL, HPCL, RNRL, Aban Offshore, Essar Oil, Reliance Petroleum and BPCL gained 5-11%. IOC and Reliance Industries were up 3-4%. Oil & Gas Index rose 277.45 points or 3.82%, to end at 7,549.76. Crude was hovering around USD 79-81 to a barrel on the NYMEX.

Healthcare Index jumped 39.89 points or 1.24% to 3,253.17. Glenmark, Fortis Health, Apollo Hospital, Lupin and Opto Circuits were up 8-14.5%.

BSE Midcap Index ended with a gain of 154.58 points or 4.21% at 3,830.58 and Small cap Index rose 158.70 points or 3.64%, to settle at 4,514.15.

Among midcap stocks, S Kumars Nationwide surged 51% and Kingfisher Airlines gained 35.70%. Mphasis, Chambal Fertilisers, DCB, Moser Baer, MIC Electronics, Bombay Dyeing and Jindal Drilling rose 20-27%. However, Core Projects tumbled 57.52%. Dalmia Cement, Monnet Ispat, Ashapura Mine and Shoppers Stop fell 10-15%.

In the small cap space, Alok Industries was up by 27.45%. HBL Power, Bajaj Auto Finance, Ion Exchange, TV TodayNetwork, Golden Tobacco, Balmer Invest, Easun Reyrl, JSW Holdings, GRUH Finance and Asian Star gained 19-20%.

F&O Snapshot:

Fresh long build up in Nifty Futures in today’s trade; adds nearly 33.5lakh shares and trading at a premium of 38 points

Fresh long build up in banking stocks; Icici bank adds 25% in OI

IT stocks sees mild long build up

Stock fut gains on back of high impact cost, more 77 stock fut gains more than 10%

Big Mover: Core Project dn 56%,  adds 18% in OI

Big Mover: S Kumar up 53%, , sheds 4% in OI

Call writing continues at higher strike prices (3600-3800)

Options Activity:

Nifty 3600 call adds 4.9 lakh shares

Nifty 3700 call adds 2.6 lakh shares

Nifty 3800 call adds 3 lakh shares

Nifty 3300 put adds 4.4 lakh shares

Nifty 3400 put adds 2.6 lakh shares

Fresh Long :

Banks : ICICI Bank , Axis Bank , Bank Of Baroda , Yes Bank

Misc : Satyam , Hul , Bharti , Infosys, Hdfc, Sail , Hindalco

Short Covering :

DCB, Bombay Deying , Chambal Fert, Hdil , Skumars,

Asian Markets Flare Up

Hang seng up 10.2%, Strait Times up 6.5%, Thailand SET up 5.3%, Kospi up 3.7%

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