FIs prop up Sensex by 184 pts, but worries remain

FIs prop up Sensex by 184 pts, but worries remain
ENS ECONOMIC BUREAU

MUMBAI, MAR 14: After the blood-bath in the last three days, stock markets rebounded on Wednesday as government-sponsored mutual funds and state-run banks intervened to soothe jittery markets rocked by a political scandal. Ignoring the political upheavals surrounding the `defence deal' expose, institutions and mutual funds went on a buying spree and pushed up the benchmark Sensex by 184 points.

FIs and funds were heavy buyers at the behest of the government, which in turn, attracted other players including foreign institutional investors (FIIs) to join the bandwagon, market dealers said. The mood was also upbeat, at least for the day, as the Nasdaq Composite Index and the Dow Jones Industrial Average spurted by 91 points and 82 points respectively last night. However, marketmen are still worried about the payment problem on the Calcutta stock exchange. Last week, CSE faced a shortfall of Rs 97 crore. The shortfall could go up this week, they said.

After a weak start at 3508.13, the BSE Sensitive Index later staged a smart recovery and gradually moved upwards to the day's high of 3757.12 before closing at 3725.03 as against 3540.65, scoring a sharp rise of 184.38 points or 5.21 per cent. The BSE-100 Index also recovered sharply by 96.87 points to 1774.89 from the previous close of 1678.02.

Cement shares cornered the limelight, scoring sharp gains. Most of the infotech stocks like Satyam and Infosys -- and several favourite stocks of big bull Ketan Parekh -- also moved up sharply. However, HFCL moved down further amidst worries about another payment crisis in Kolkata.

Discounting a flutter created on the bourses yesterday by a fictitious defence deal expose by an internet portal that threatened to have far-reaching political implications, operators and speculators returned for normal trading as heavy purchases by institutions injected fresh confidence in the broking fraternity. "Domestic institutions are buying across the board and there is some buying by some foreign funds," said an analyst.

Several analysts are still convinced about the bounce-back of the market. "This could be a dead cat bounce," said an official of ING Investment Management, adding, "Whether the market will sustain the rise will depend on how events unfold over the next few days." The market is closely watching an arms bribery scandal which rocked parliament on Wednesday, prompting opposition deputies to call for Prime Minister Atal Behari Vajpayee's resignation.

"The political crisis is there at the back of the mind," said one dealer at a foreign brokerage, adding, "today's buying translated into big gains because the market was heavily oversold." At close on Tuesday, the benchmark index had plunged 19.3 per cent from its peak on March 1.

On Tuesday, Sensex had staged a dramatic recovery and was quoted past the 3700-level -- wiping out the 300 plus loss in less than 30 minutes -- after midesession following aggressive purchases by domestic institutions on the back of government's decision to corporatise stock exchanges. However it plunged again to close with a loss of 227 points following the expose of a `defence deal' by an internet portal.