Markets snap 6-day slide on short covering; rise 1.6%

Markets snap 6-day slide on short covering; rise 1.6%

Mumbai: Markets gained 1.6% on Wednesday, snapping a six-session fall, on short covering as global markets recovered after the US Federal Reserve pledged to maintain near-zero interest rates for at least two more years.

Investors also took comfort from data showing China’s export

growth accelerating in July, calming fears that weak demand from Europe and the United States would hit the world’s second-biggest economy.

“The pressured selling has stopped in the global market. That’s the reason some amount of recovery has happened. We don’t rule out some amount of short covering at the same time," said Deven Choksey, managing director and CEO of K.R. Choksey Shares.

“One has to tread carefully in this market and we will have to play on bounces and dips now."

The 30-share BSE index ended up 1.62% at 17,130.51 points, with 23 components advancing, having risen as much as 2.3% in opening deals. The index has fallen nearly 7% over the previous six sessions.

Cautious foreign institutional investors have sold Indian equities worth about $803 million so far this month, after investing a net $2.3 billion until July end.

“While India does not remain immune to a contagion following the US debt downgrade, as of now we expect the impact on the Indian economy to be limited," Alexander Treves, head of Investments-India at Fidelity International, told Reuters Insider.

“Aside from the current short-term volatility, we expect India to do well over the longer term," he said.

Major Asia indexes gained between 1 and 3%, after Wall Street shares on Tuesday posted their biggest one-day gain in more than two years, when the S&P 500 index leapt 4.7%. .

Reliance Industries, which has the highest weight on the main index, rose about 1%. The stock has lost more than a quarter of its value so far in 2011, mainly dragged by worries of slowing production from its showcase gas fields, off India’s east coast.

Bucking the trend, state-run Indian Oil Corp fell more than 3% as its first quarter net loss widened to 3,719 crore.

Tech majors Tata Consultancy Services and Infosys gained 2% and 3%, respectively, having lost nearly 15 and 14%, respectively, over the previous six sessions until Tuesday, as worries over the global economy dented outlook for outsourcers.

Software services exporter Mahindra Satyam jumped more than 10%, after it reported late Tuesday that quarterly net profit more than doubled, on higher client spend and margin expansion.

Mahindra & Mahindra , India’s largest utility vehicles maker, rose more than 5% after Morgan Stanley upgraded it to “overweight" from “equalweight", saying it would benefit from weak commodity prices and margin expansion in the second half of fiscal year 2012.

Local sales of trucks and buses, a key pointer to economic activity, rose 23.7% to 64,241 vehicles in July, an industry body said. Car sales, however, fell 15.8%, hit by higher interest rates and vehicle costs.

Commodity prices rebounded on Wednesday, after the US central bank’s move, although the markets remained wary about its implication.

The MSCI’s measure of Asian markets other than Japan was up 2.47%, while Japan’s Nikkei rose 1.05% and South Korea’s Kospi was higher by 0.27%.

The 50-share NSE index ended 1.74% higher at 5,161 points.

In the broader market, 1,210 gainers far outnumbered 247 losers on a volume of 651.7 million shares.