Short covering or a catch-up rally? What drove Sensex up 996 points
Among the blue chips, bank and financial stocks were in heavy demand.
by Shubham Raj
NEW DELHI: Domestic equity investors took a leap of faith on Wednesday and equity indices rallied in afternoon trade trying to catch up with global markets, and even outperforming some of them.
Among the blue chips, bank and financial stocks were in heavy demand while media was the only sectoral index that traded in the red on NSE. Metals and IT stocks continued their upward journey as reopening of economies across the world boosted investor sentiment on these counters.
“Banking stocks saw some institutional buying. There were a couple of foreign institutional investors (FIIs) who were continuous sellers till about 4-5 days back. That has come to an end. Now, others are finding the prices attractive,” said Deepak Jasani of HDFC Securities.
For the day, 30-share Sensex rallied 3.25 per cent or 996 points to close at 31,605, while the 50-share Nifty climbed 3.17 per cent or 286 points to close at 9,315.
Among the sectoral indices, Nifty Bank and Nifty Private Bank Indices rose more than 6 per cent each, while Nifty Financial Services Index gained nearly 5 per cent. Nifty Media was the only loser, down 0.70 per cent.
Analysts said recent outperformance of US and Asian markets had a positive rub-off on Dalal Street. Dow Jones spiked 2.17 per cent in overnight trade, closing just shy of the 25,000 mark. Asian markets were trading with gains while benchmark indices in the UK, France and Germany added over a per cent each in the opening tick.
“We were anyway underperforming, and now we are catching up with them. We will underperform for a few days and outperform in some other days. This will continue,” said Jasani.
Another reason for the spike in indices was short covering and rollover of positions in the futures and options market ahead of Thursday’s expiry, said analysts.
Siddhartha Khemka of Motilal Oswal Financial Services said Indian market is playing catch up with global peers and added that there was also a fair bit of short covering.
“For the past two days, global markets were rallying while Indian market was not participating in it. Finally, they have started participating, which led to a lot of short covering. Banking, NBFC stocks had a lot of short positions which are getting rolled over,” he said.
He said technically, Nifty and Bank Nifty are bouncing from their support levels. It means the market will be positively biased over the next two days.
The market rally spun Rs 1.71 lakh crore wealth for equity investors as total market capitalisation of the BSE-listed firms rose to Rs 123.32 lakh crore on Wednesday from Rs 121.60 lakh crore on Tuesday, data available with the exchange said.