The Telegraph
Since 1st March, 1999
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Nuke tiff shadow on super show

Mumbai, Aug. 20: The crackling tension between the Left and the UPA over the nuclear deal with the US appeared to stymie what should have been a runaway rally on the stock markets.

As Asian markets rebounded by over 5 per cent after the US Federal Reserve’s decision to pare a key interest rate by half a percentage point on Friday, the sensex response was less effusive though it did surge by around 538 points at one stage.

A bout of profit-taking saw the bellwether index close with a gain of 286.03 points, or 2.02 per cent, at 14427.55.

Analysts said one reason why the key index came off its highs was the ongoing confrontation between the Manmohan Singh government and the Left parties. Uncertainty over the future of the government saw many players hesitant to take fresh positions.

This sudden emergence of a “local factor” comes after the US sub-prime mortgage crisis had rattled stock markets globally.

The Fed’s move to provide liquidity to US banks and steer them out of trouble sent out strong signals to the market on Friday that saw the Dow Jones and other European indices ending in strong territory.

Stocks in emerging markets also reacted positively to the development with nearly all key indices opening strong and maintaining the uptrend throughout the day.

While the Hang Seng Index surged 1208.50 points, or 5.9 per cent, the Nikkei rose by 3 per cent and Shanghai Composite Index rose 5.3 per cent, its biggest one-day percentage gain since June 8, 2005. Other indices also moved in the region of 4 to 6 per cent.

Reacting to good cues coming from overseas markets, the BSE sensex opened with a fairly wide upside gap at 14512.28 against Friday’s close of 14141.52. It quickly consolidated its gains when it hit an intra-day high of 14680.09 early in the day. However, the gains could not be sustained as market participants held a cautious approach in view of the political stalemate in New Delhi.

The benchmark index later ended at 14427.55, a gain of 286.03 points or 2 per cent over the previous close.

“When compared to others in the region, the performance of Indian stock markets was dull. This was on account of regional factors. Though global cues will continue to play a crucial role, the situation here will also have a bearing,” an analyst from a foreign brokerage said.

He added that this caution could see gains being capped from here on. Most of the market observers are, however, optimistic that the current crisis will blow over in a few days.

Although most of the indices ended in the green, it was the BSE Bankex that showed the largest percentage gain because of a strong rally in all bank stocks. These counters had come under pressure in the past few days due to the bearishness in finance shares.

ICICI Bank spurted by Rs 46.00 to Rs 871.95 as market observers reacted positively to the news of the Foreign Investment Promotion Board clearing investments in a new holding company. The SBI gained Rs 30.95 to Rs 1,550.45 and HDFC Bank rose by Rs 55.75 to Rs 1,125.00.

However, IT stocks did not participate in the rally. Infosys Technologies declined by Rs 25.80 to Rs 1,829.00, TCS was lower by Rs 1.55 to Rs 1,054.55 and Satyam Computer dipped Rs 7.70 to end at Rs 432.50.

The US sub-prime mortgage crisis has sparked a fear that the IT companies, which cater largely to the banking and financial services sector in the US, may see a dip in demand.

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