Mumbai: August 09, 2011 – The Indian markets have made a spectacular recovery, with the Sensex gaining nearly 500 points from the day’s low, as investors bought stocks at bargain prices. At 1208 hours, the Sensex was down only 85 points, trading at 16,904 and the Nifty was down 23 points to 5,095.
The Indian markets mirrored Asian stocks that closed off the day’s low. South Korea’s Kospi, once down 8 per cent, closed 3.5 per cent lower while Japan’s Nikkei was down just over 1.5 per cent. The Chinese indices were in the green.
“We are searching and looking for bargains…prices have come down sometimes by 20 per cent, “Mark Mobius of Templeton Asset Management said, adding, “We are very interested in getting something in India and hopefully we can pick up some nice bargains… We want to be more exposed to Indiaâ€¦ it is just a matter of price.”
The recovery was in contrast to over 500 points plunge that the Sensex witnessed in early trade. The Nifty had slipped below 5,000 for the first time since June, 2010.
Analysts said Indian equities are attractively valued while the government has maintained that the economy is resilient and will bounce back. A fall in crude prices will pull down inflation and force the RBI to hit a pause on successive rate hikes that have affected corporate margins.
Auto and FMCG stocks jumped back into the green and realty stocks also saw buying interest. However, IT stocks continued to remain under pressure and were trading over 2.5 per cent lower.
On the Sensex, 14 of the 30 stocks bounced back into the green led by M&M that reported a 8 per cent jump in net profits on Monday. M&M and Bajaj Auto were trading with over 3 per cent gains. Sterlite, DLF, ITC, SBI and ONGC also saw buying interest.
Among the laggards, TCS remained at the bottom of the Sensex, with a 4 per cent loss. Sun Pharma, Wipro, Tata Motors, Infosys and Tata Steel were trading 2.5-4 per cent lower.
The market breadth had improved substantially and 29 per cent stocks were trading higher on the BSE 500 index.
Suresh Mahadevan of UBS said in the immediate short term high beta markets like India get sold down. “In the immediate short term, the big risk is outflows… Once we get over that, valuations may act as a trigger,” Mr Mahadevan said. The Indian markets received a record $30 billion inflow in FY11. While there might be a lot of pain in the short term, the Indian markets are bound to bounce back in the medium to long term. “The next 2-3 months will be tough for Indian markets but once we get into October things would get better,” Mr Mahadevan said.
The early plunge came on the back of the sixth biggest point decline ever on the Dow Jones Index, which tanked 644.76 points, in its worst drop since December 2008. Worries about the US economic recovery have spooked sentiments. Growth in manufacturing and services has been flat in July and consumer spending has also slowed. The US GDP grew at its slowest since the end of the Great Recession in June 2009. Besides the fears of European debt crisis spreading to bigger countries like Italy and Spain have kept invests on tenterhooks. (ndtv)