Bulls lift Sensex 490 pts after Fed move; debt-laden stocks spike

Sensex surged more than 500 points intraday on June 20 as bulls gathered momentum as the day progressed, driven by buying across sectors. The market opened lower but rebounded in the initial hour itself.

Positive global mood riding on Federal Reserve hinting rate cuts in the coming year, short covering, and value buying in badly beaten down debt-laden companies’ shares lifted investors sentiment despite a rally in crude oil prices.

Sensex jumped 488.89 points or 1.25 percent to 39,601.63 while the Nifty closed decisively above 11,800, up 140.30 points or 1.20 percent at 11,831.80 and formed large bullish candle that resembles a Long White Day or ‘Bullish Engulfing’ pattern on daily charts.

“This is a clear indication of a dead cat bounce where fundamentally weak companies face sudden moves for no sound reason. There is a high probability that the capitulation in debt-laden companies is done as of now and markets are trying to stabilise,” Umesh Mehta, Head of Research, Samco Securities told Moneycontrol.

He said the Street is also cheering the Fed’s move to keep the rates unchanged with an expected rate cut of about half a percentage point in the coming year. This will ensure an inflow of funds to emerging countries like India and boost the markets.

He feels hopefully the Budget in July will bring out some clear trend in the bourses and help to retrieve the lost confidence among the retail investors.

Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in said technically this strong recovery appears to have paved the way for the much-awaited pullback rally towards 12,000 as short-term critical hurdles are cleared.

The buying was seen across sectors with bank (up 1.4 percent), auto (2.5 percent), metal (1.9 percent), pharma (3 percent) and realty (1.9 percent) being prominent gainers.

The Nifty Midcap and Smallcap indices outperformed frontline indices, rising 1.6 percent and 1.5 percent, respectively. About three shares advanced for every two shares falling on exchanges.

Stocks in news

Yes Bank was the biggest gainer among Nifty stocks, rising 11 percent after falling to double digits for the first time in last five years.

Indiabulls Housing rallied 8 percent after the company decided to buyback all non-convertible debentures maturing in July and August aggregating to Rs 2,285 crore.

Sun Pharma (4.08 percent), IndusInd Bank (up 3.93 percent) and L&T (3.45 percent) were other top gainers. However, UPL, Wipro, Adani Ports, Britannia and Tech Mahindra were losers.

Jet Airways was the biggest gainer of the day, rising 93 percent ahead of order from National Company Law Tribunal on insolvency plea filed by State Bank of India later today.

Reliance Infrastructure and Reliance Capital rallied 35 percent and 28 percent, respectively.

Jain Irrigation gained 22 percent after management clarification on recent fall and pledged shares. The company assured investors and stakeholders that it was moving forward with normal operations and was confident of fulfilling its agenda while making serious efforts to deleverage its balance sheet.

Vedanta climbed 2 percent Goa Chief Minister Pramod Sawant assured mining industry dependents that issues related to the sector will be resolved by July end.

Apollo Hospitals Enterprises gained 1.4 percent after global brokerages said the decision to sell stake in Apollo Munich Health Insurance to HDFC was positive for the company as the deal will help it reduce pledged shares.

Global cues

Asian stocks were higher after the US Federal Reserve kept the interest rate unchanged. China’s Shanghai Composite rallied 2.4 percent and Hong Kong’s Hang Seng was up 1.23 percent while Japan’s Nikkei gained 0.6 percent.

European markets traded sharply higher ahead of interest rate decision from the Bank of England later today. France’s CAC, Germany’s DAX and Britain’s FTSE were up 0.4-0.9 percent at the time of publishing this copy.

Crude oil prices rallied nearly 3 percent to $ 63.5 a dollar after a media report indicated that US drone was shot down by Iran which could raise fears of military confrontation between Tehran and Washington.

Gold prices hit five-year high after Federal Reserve pointed towards rate cuts, rising nearly 3 percent.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.