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Hopes of a bailout keep markets afloat

Hopes of a bailout keep markets afloat
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First Published: Wed, Oct 01 2008. 12 25 AM IST
Updated: Wed, Oct 01 2008. 12 25 AM IST
Mumbai: Growing belief that the US will eventually have a bailout package of some sort and overselling on Monday and through last week ensured that key Asian markets, including those in India, ended the day with gains, despite an initial bailout package worth around $700 billion (Rs32.83 trillion) not being cleared by the US House of Representatives.
Investor sentiment in India was also boosted by feel-good messages from finance minister P. Chidambaram, Securities and Exchange Board of India (Sebi) chairman C.B. Bhave, and Reserve Bank of India (RBI) governor D. Subbarao.
The behaviour of Asian markets was reflected in the US too, where hopes that a new plan would emerge and be approved lifted stock indexes. At 9.00pm India time, the Dow Jones Industrial Average was trading at 10,608.93 points, up 2.35%.
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In India, the benchmark index of the Bombay Stock Exchange, Sensex, recovered around 700 points from its day’s low to close 264 points or 2.1% higher at 12,860.
“Ultimately, they will do something,” said Mumbai broker Ramesh S. Damani, referring to the bailout Bill in the US. Damani termed Tuesday’s bounce “a technical rally”, and said that he believes that the market “has not made a final bottom yet”.
“There is a growing belief, some kind of a compromise deal will be done soon,” said a hedge fund manager in Hong Kong who did not want to be named. Some investors expect the US Federal Reserve and other central banks to announce a cut in interest rates.
Earlier on Tuesday, Sebi’s Bhave said there was no cause for concern over the clearing and settlement mechanism in stock exchanges and said there would be no immediate action against short-selling, where investors expect the prices of shares to fall. The comment came in the wake of bans against short-selling in South Korea, Taiwan and Indonesia.
“I think that some people are giving credence to rumours and unfounded apprehensions. I maintain and I repeat, all our banks are well capitalized and well regulated. No Indian depositor need be apprehensive,” Chidambaram said, referring to the huge sell-off in shares of ICICI Bank Ltd, the country’s largest private sector bank. ICICI Bank shares gained 8.4% on Tuesday to Rs534.80, after losing about 22% in the past week. The National Stock Exchange’s 50-stock Nifty index gained 71 points or 1.8% to close at 3,921.20.
Meanwhile, a local brokerage said there could be reason to cheer for investors here who could pick stocks at attractive valuations. “Amidst all the gloom, some flowers may bloom,” said India Infoline Ltd in its client note on Tuesday.
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First Published: Wed, Oct 01 2008. 12 25 AM IST