Markets rebound on short covering, bankex rallies

MUMBAI, May 6 (Business Standard): Markets bounced back after posting losses for nine consecutive sessions as commodity prices plunged overnight and buying emerged in banking and auto counters. Nifty opened in the green and touched a high of 5,564 in the last leg of the trade led by short covering. Recovery was anticipated as markets were extremely oversold due to heavy selling seen in the past few sessions. Investors cheered falling crude prices as it could bring some respite to high inflation which has been eating into companies operating margins. S&P CNX Nifty closed up 92 points, at 5551 and the Sensex surged 308 points, at 18,519. Markets bounced back after posting losses for nine consecutive sessions as commodity prices plunged overnight and buying emerged in banking and auto counters. Nifty opened in the green and touched a high of 5,564 in the last leg of the trade led by short covering. Recovery was anticipated as markets were extremely oversold due to heavy selling seen in the past few sessions. Investors cheered falling crude prices as it could bring some respite to high inflation which has been eating into companies operating margins. S&P CNX Nifty closed up 92 points, at 5551 and the Sensex surged 308 points, at 18,519 Brent crude fell from a high of $124bbl to $109bbl, down nearly 13per cent in one day, the steepest decline in last two years. Navneet Daga, Derivative Analyst from KR Choksey securities said, that "the PCR (Put Call Ratio) had fallen to 0.91 levels, if the ratio falls below 1.0 it indicates that markets are oversold." Nifty index had fallen from 5900 to 5400 in the past nine sessions. Daga added, a positive closing may take the markets to 5600, where it may consolidate. Gopal Agarwal, Head-Equity, Mirae Asset Global Investment said, corporate profits and commodities will decide the market direction in the short term. The price decline in the commodity market has helped the market today because if it sustains the input costs for companies will come down. Besided growth concerns weighing on the India markets, fund managers said that FIIs may have started moving funds towards dollar based assets. The Dollar Index appreciated by 4per cent from 73 to 74 levels in the past session. FIIs have sold shares over Rs 6000 crore in the past eight sessions. While the rout in commodity prices boosted Indian shares, elsewhere across Asia markets plunged. Shares in Hong Kong and China lost ground, down around 0.4per cent each as rout in oil and commodity prices pummeled resource shares. Japan's Nikkei also average fell 1.5per cent as rising Yen weighed on exporter shares. Back in India Investors cashed in on banking shares which were battered badly in the sell-off after the 50 bps rate hike on Tuesday. The BSE Bankex index was up 3.7per cent. Union Bank rallied 10per cent, Indusind Bank up 6.5per cent, Yes Bank and ICICI Bank gained over 5per cent and Axis Bank advanced 3.7per cent.