Sensex leaps 1,030 points. Did short covering fuel the market rally?

BSE flagship Sensex climbed 1,073 points or 2.16% to 50,824.71.
NEW DELHI: In a baffling move, benchmark indices shot up specularly in an unprecedented extended session, which many analysts speculated could be due to short-covering ahead of F&O expiry.

BSE flagship Sensex climbed 1,030.28 points or 2.07 per cent to close at 50,781.69, and NSE Nifty advanced 274.20 points or 1.86 per cent to settle at 14,982.00.

“I think it has to do with expiry. A lot of transitions may have gotten stuck, because of the glitch. So now, they may have taken a call to square their position today itself, rather than waiting, fueling a buying,” said Vinod Nair, Head of Research at Geojit Financial Services.

There is no particular fundamental reason for the market to rally this much, he added.

Ambareesh Baliga, a seasoned market analyst, also said it looks like short-covering but, also said that he was not sure. He speculated that people may have panicked due to the glitch.

Massive buying was seen in banking counters, led by HDFC Bank, Axis Bank and ICICI Bank that rose 4-5 per cent. Bajaj Finance, HDFC and SBI were other major gainers among largecap stocks.

The government announcement of lifting embargo on the grant of government businesses to private banks also fueled buying in private banking stocks.

Broader market indices also rose, but underperformed their headline peers. Nifty Midcap added 1.03 per cent while Nifty Smallcap climbed 0.97 per cent. India VIX tumbled 6 per cent to 23.63.

“What a massive rig up in the markets by opening it for a short period for time. Not healthy, totally inverse to all other emerging markets. NSE closure and then opening for a restricted time a day before F&O expiry needs proper investigation,” Sandip Sabharwal, an independent market analyst, said in a tweet.

Among the bluechip names, HDFC Bank was the top gainer, rising 5.36 per cent. Coal India, Axis Bank, ICICI Bank, Bajaj Finance, HDFC, SBI, L&T and Kotak Mahindra Bank were other gainers.

UPL was the top loser in the Nifty pack, falling 2.37 per cent. Power Grid, Dr Redy’s Labs, JSW Steel, TCS, Tata Motors, GAIL, Asian Paints and Sun Pharma were others that ended in the red.

Aditya Birla Capital, AU Small Finance Bank, Dhani Services, Rain Industries, NBCC and Rashtriya Chemicals were top gainers from mid and smallcap indices, climbing in the range of 5-10 per cent.

“We expect volatility to remain high on Thursday due to the scheduled derivatives expiry of February month contracts. It would be prudent to avoid naked leveraged positions in early trades and prefer hedged bets.”

— Ajit Mishra, Religare Broking

Jubilant Foodworks, Mphasis, Cholamandalam Investment and Finance, Indiamart Intermesh, Firstsource Solution and Sun Pharma Advanced were major losers from broader market space, falling in the range of 2-5 per cent.

Barring Nifty IT that slipped 0.11 per cent, all sectoral indices on NSE ended with gains. Nifty Private Bank jumped 3.87 per cent while Nifty Bank rose 3.80 per ent. Nifty Financial Service and Nifty PSU Bank were other major gainers.

Market breadth was in favour of gainers as 1,863 stocks ended in the green while 1,068 scrips settled with cuts. As many as 252 securities hit 52-week highs, mostly from the smallcap space. Meanwhile, 38 counters hit 52-week lows, mostly from the microcap space. About 340 stocks hit upper circuit limits and 221 lower circuit limits.

European markets were trading with gains at the last count. London-based FTSE was up 0.25 per cent while Paris and Frankfurt added 0.22 per cent and 0.85 per cent, respectively. In Asia, barring Singapore that added 1.17 per cent, all other markets registered losses.

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Source: Sensex leaps 1,030 points. Did short covering fuel the market rally?

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