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Markets recover to end flat on short covering

16 September, 2008 02:20:54

Indian equities markets seemed to have weathered the financial tsunami on Tuesday, following
the collapse of Lehman Bros and buy out of Merrill Lynch, to end the day more or less flat.

The recovery clearly showed signs of short covering, analysts said.

The 30-share benchmark sensitive index (Sensex) of the Bombay Stock Exchange (BSE) ended
the day at 13,518.80, down just 12.47 points or 0.09 percent from its previous closing on
Monday at 13,531.27.

The Sensex had, however, opened with a fall of nearly 500 points.

"This early fall gave bears with short positions a chance to book profits as over Friday, Monday
and early Tuesday there was a total fall of about 1,500 points," said Jagannadham
Thunuguntla, equity head of Delhi-based Nexgen Capitals Ltd.

Nexgen is the securities arm of the fourth largest share brokerage house in the country the SMC
Group.

The National Stock Exchange saw a similar trend. It opened very weak, down more than 125
points, but again began to recover on short covering by bears and some bottom fishing.

After two short dips during the day, it finally recovered enough to end the day with a marginal
gain.

The broader based 50-share S&P Nifty of the NSE ended the day at 4,074.90, a marginal gain of
2 points or 0.05 percent over its previous close Monday.

The BSE midcap ended at 5,217.25, down 71.34 points or 1.35 percent. The BSE small cap
index ended at 6,289.41, down 91.06 points or 1.43 percent.

"With good news expected out of the world's largest economy the US later today, bears booked
profits as the markets may start moving up again on Wednesday," Thunuguntla said.

He was referring to the fact that the US central bank is expected to cut a key short-term interest
rate by 25 to 50 basis points from its current 2 percent.

"Given the current situation, they really have no choice but to inject liquidity even if it means
adding a bit to inflation," he said.

The world's largest and second largest investment banks Goldman Sachs and Morgan Stanley are
also expected to report earnings on Tuesday and Wednesday, respectively. All this may push up
markets Wednesday onwards which led to the short covering, Thunuguntla said.

Sectorally, realty, consumer durables, health care and metal stocks were the biggest losers. Oil
and gas, banks, public sector units and fast moving consumer goods stocks were in the black.

State Bank of India (SBI), Sterlite Industries, Reliance Industries and HDFC Bank were the
biggest gainers.

SBI moved up Rs 96.60 or 6.49 percent to 1,585.50 from its previous close on Monday of
1,488.90. Sterlite Industries gained Rs 12.40 or 2.66 percent to close at Rs 477.70 up from Rs
465.30.

Reliance Industries moved up Rs 44.35 or 2.35 percent to finish at Rs 1,928.45 up from Rs


1,884.10. HDFC Bank rose Rs 26.00 or 2.16 percent to close at Rs 1,230.05 up from its previous
close on Monday of Rs 1,204.05.

The top losers were ICICI Bank, Jaiprakash Associates, Maruti Suzuki and Ranbaxy
Laboratories.

ICICI Bank lost Rs 36.55 or 5.82 percent to finish at Rs 591.35 down from Rs 627.90. Jaiprakash
lost Rs 7.50 or 5.09 percent to end at Rs 139.80 against its previous close on Monday of Rs
147.30.

Maruti Suzuki shed Rs 25.65 or 3.55 percent to close at Rs 697.75 down from Rs 723.40.
Ranbaxy Laboratories ended the day at Rs 405.90 down Rs 13.55 or 3.23 percent against its
previous close of Rs 419.45.

The market sentiment was negative with 1,752 shares declining, 886 advancing and 73
remaining unchanged.