Bank bailout lifts mood across markets

Renewed efforts by the US to control its economy from slipping further into recession sent a ‘positive’ signal globally, with most equity
benchmark indices, including those in India, registering significant gains. Local index heavyweights helped the benchmark Sensex and the broader Nifty gain more than 3% each. However, market breadth was not very convincing, and neither was traded turnover.

The Sensex opened the day with a positive gap and traded in the green throughout the session. The index ended with a gain of 276.85 points at 9,323.59. The Nifty rose 91.75 points to close at 2,828.45. Elsewhere in Asia, Japan’s Nikkei gained 207 points while Hong Kong’s Hang Seng and China’s Shanghai Composite ended with a gain of around 1% each.

Earlier in the day, much before Indian bourses opened for trading, news was already out that the US government would invest $20 bn in bank of America — the largest US bank by assets — and guarantee $118 billion of assets to help it absorb Merrill Lynch. The bank posted its first loss since 1991. Citi announced a $8.29-billion loss after market hours. According to Bloomberg, the bank would be split into two to rebuild a capital base decimated by the credit crisis.

“The news about BankAm bailout convinced investors that the US government would go to any length to stem the economic crisis,” said a dealer. “Sentiment was strengthened also because of the fact that the European Central Bank announced another rate cut (50 bps) on Thursday,” he added. However, most market participants say not all investors are ready to bet on the market at the current juncture.

Lack of investor interest was clearly evident from Friday’s low turnover. Total volume was pegged at Rs 42,929 crore, much lower than Thursday’s Rs 51,000-plus crore. The breadth was almost equally divided among gainers and losers.

Among Sensex constituents, NTPC, RIL, Tata Power, Bharti Airtel and ONGC gained in the range of 3-8% each. Bajaj Auto, Essar Shipping, SAIL and Suzlon Energy were among top gainers in BSE’s ‘A‘ group.

Meanwhile, provisional figures revealed foreign investors net-sold Indian shares worth Rs 585 crore. Domestic investors, on the other hand, were buyers of shares worth Rs 400 crore.