Equity benchmarks saw relief rally amid intense volatility on Tuesday after a massive 6 percent crack seen in the previous session. Short covering and strong recovery in European markets & US futures lifted sentiment but the further crack in major Asian markets like China and Japan capped the upside. Meanwhile the currency gained past 66 a dollar intraday after sudden rate cut by the China central bank.
The 30-share BSE Sensex rallied 290.82 points or 1.13 percent to 26032.38 after seeing an intraday high of 26124.83 and low of 25298.42. The 50-share NSE Nifty failed to hold 7900-level, up 71.70 points or 0.92 percent to 7880.70 after hitting a day’s low of 7667.25.
The broader markets outperformed benchmarks but the market breadth did not turn positive. The CNX Midcap index rallied nearly 2 percent and BSE Smallcap gained more than 1 percent. About 1509 shares declined against 1212 shares advanced on the Bombay Stock Exchange.
Experts remained cautious in near term, though they see further short covering on Wednesday following interest rate cuts by China central bank. They also see some volatility ahead of expiry of August derivative contracts (on Thursday). They all are positive on India despite current weakness led by China.
“We are still in the midst of a bull market correction, this is not the time to turn bearish and sell out, fundamentally strong markets like India will bottom out quickly,” Ridham Desai of Morgan Stanley said. He also refuted that panicking FIIs are in a hurry to exit India. Instead, most FIIs are still overweight India, he added.
Vibhav Kapoor of IL&FS, who sees 7500-7600 as good support level in the short term, said investors should look at every decline as a buying opportunity.
Asian markets closed mixed but rest of global markets were strong. China continued to see turmoil, collapsing another 7.6 percent (in addition to 8.5 percent fall in previous session) and Japan closed 4 percent lower today while Hang Seng gained 0.7 percent.
European markets also bounced back after ‘black Monday’. In fact, indices extended rally after sudden rate cut by China. France’s CAC and Germany’s DAX rallied 4.8 percent each (at 16 hours IST). Britain’s FTSE rose 3.6 percent. Even 3 percent rally in Dow Jones and S&P 500 futures pointed towards strong US opening today after bloodbath in previous two sessions.
Meanwhile, to support the Chinese economy, central bank People’s Bank of China has lowered its one-year lending rate by 25 basis points to 4.6 percent and also cut deposit rate by 25 basis points to 1.75 percent effective August 26, while slashing banks’ reserve requirement ratio by 50 basis points effective September 6 (the fifth consecutive interest rate cut since November). Additionally, there has been a 300-bp reserve requirement cut for financial & auto leasing companies and a 50-bp cut in reserve requirement for rural commercial & rural corporate banks.
Oil regained some lost ground with a 3 percent rally. Brent crude was trading at USD 44.08 a barrel and NYMEX crude was at USD 39.37 a barrel.
Back home, the rupee gained 64 paise at 66 a dollar today, after hitting intraday high of 65.89 a dollar and low of 66.76/dollar, following recovery in equity markets and China rate cut.
Banks led the recovery in today’s trade with the Bank Nifty up 381 points. ICICI Bank, Axis Bank and State Bank of India rallied 3-5 percent.
Tata Motors, Reliance Industries, Coal India, NTPC, Vedanta, Tata Steel and GAIL surged 3-8 percent. However, HDFC, Maruti Suzuki, Tata Power, Ambuja Cements, Power Grid Corp and HCL Tech lost 1.5-6 percent.