MUMBAI, OCTOBER 23: Euphoria is back on Dalal Street, at least for the time being. Shrugging off the shock created by the Sebi proposal to curb the use of participatory notes, the market staged a strong rally today, with the Sensex posting its biggest ever single-day point gain of 879 points (4.99 per cent) to close at 18,492.84. The market sentiment got a shot in the arm after Sebi provided a partial breather to FIIs on use of PNs and said it would speed up regulatory clearance for foreigners keen to invest transparently.

The previous biggest single-day gain of the Sensex was on October 9, 2007, when it had risen 789 points (4.51 per cent) to 18,280.24. With today’s rally, the Sensex has gained more than half of what it lost last week. The Sensex was battered last week, falling by 1,600 points (8.39 per cent) in four days after the regulator proposed restrictions on PNs on October 16.

Marketmen were enthused by the Sebi move to allow proprietary sub-accounts (through which FIIs handle participatory notes) to get the FII. Though the application must be submitted in a week, market sources said many FII sub-accounts are likely to convert to FIIs in this period. Sebi will go ahead with its proposed restrictions on FII investments through PNs but the instrument is here to stay, provided the anonymity behind it is lifted.

Speculation that Sebi has cleared a proposal allowing foreign individual investors to invest on Indian bourses aided the surge in the second half of the trading session. The minimum net worth criteria for a foreign individual investor, who intends to invest directly is set at $50 million, the reports suggest. “Besides, there was massive short-covering by bear operators who sold shares heavily after the PN move by Sebi. Bears are covering their positions ahead of the derivative expiry on Thursday,” said BSE dealer R A Poddar.

Another factor that worked in favour of the bulls is the continuing flow of good second quarterly results. Asian markets too were higher today — the Hang Seng (up 3.54 per cent), Taiwan’s Taiwan Weighted (up 1.51 per cent), Nikkei (up 0.07 per cent), South Korea’s Seoul Composite (up 2.32 per cent) and Singapore’s Straits Times (up 1.45 per cent) edged higher. From a recent intra-day low of 17,171.45 touched on Monday, the Sensex has surged 1,321 points to reach the current 18,492.84. It is now 705.82 points away from the all-time high of 19,198.66 struck on October 18. The Sensex plunged over 1,500 points between October 17 and 19 after Sebi proposed curbs on PNs to moderate the copious FII inflows.

The market is expected to witness volatility in the coming days in view of several important meetings. The Sebi board is meeting on Thursday to decide on PNs. The RBI’s mid-term review of annual policy is due on October 30 and the US Federal Reserve Board meeting on October 31 will also be crucial as any Fed move on interest rates will drive the global markets.

Why Sensex bounced back?

•Speculation that foreign individual investors would be allowed to invest directly

•Big short-covering as last week’s sellers cover their positions

•Other Asian markets too moved up

What’s ahead?

•Sebi’s crucial meeting on Oct 25 to finalise PN norms

•RBI monetary policy on October 30

•US Fed meet on October 31 to review rates

•Derviatives expire on Thursday; FIIs may start unwinding PNs

Rupee too bounces back

MUMBAI: The rupee notched its biggest rise in three weeks on Tuesday as a 5 per cent surge in the stock market raised expectations that capital inflows, a key driver of its gains this year, would remain robust. The rupee ended at 39.59/ 60 per dollar, 0.75 per cent above Monday’s close of 39.89/ 90 and the largest daily gain since October 3, taking it back towards the 9-year high of 39.27 hit earlier this month.