Sensex defies US markets, at 6-month high

Huge short covering and strong buying from institutional players and traders alike helped the Bombay Stock Exchange Sensitive Index, or Sensex, to a six-month high on Wednesday.

As the markets opened on Wednesday after staying shut on Tuesday for Ambedkar Jayanti, a spirited rally defied yesterday's subdued US markets as well as Infosys Technologies' guidance that its earnings per share will fall 3-7 per cent this financial year.

Market men said many players sold short in the early hours of trading. However, they were forced to cover their positions as stock prices rose steadily through the day. "While there was huge short covering, inflows from foreign institutional investors and rising risk appetite has helped the market," said Amitabh Chakraborty, head (equities), Religare Securities.

The Sensex climbed 317.51 points, or 2.90 per cent, to close at 11,284.73 points. The CNX Nifty closed at 3484.15, up 101.55 points, or 3 per cent. The BSE mid-cap and small-cap indices rose even higher by 3.95 per cent and 5.32 per cent, respectively.

However, traders expect the market to fall due to uncertainties in the global markets and the impending elections. Samir Arora, fund manager at Singapore-based Helios Capital, said: "Markets cannot maintain this momentum. It's only after election results that there will be a proper direction."

But the anticipated correction may not be drastic. Earlier, it was expected that a correction would drive Nifty down to as low as 2,300 -2,400. The current buoyancy has improved the outlook considerably, raising the perceived bottom to 2,900-3,000. "Typically, like panic selling, there is panic buying from investors when they realise that they are losing out on a good opportunity," said a fund manager.

At BSE, other than the IT index, which fell 1.71 per cent, all the other indices closed in the green. The realty index rose 8.79 per cent, capital goods 7.36 per cent, power 5.19 per cent and Bankex 4.53 per cent.

Among the Sensex stocks, Tata Motors and DLF rose 11.50 per cent and 10 per cent, respectively. Other stocks that led the rally included BHEL (9.48 per cent), Reliance Infrastructure (7 per cent), ICICI Bank (6.77 per cent) and L&T (6.65 per cent).

FIIs bought shares of Rs 684.50 crore and domestic institutional investors Rs 290.22 crore, according to provisional data from BSE on Wednesday.