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Sensex leaps 352 points as good news sweeps bourses

Our Markets Bureau

After Black Tuesday's bloodbath on Dalal Street, stock markets staged a remarkable recovery on the back of a series of good news.

There was a wave of relief in the market with the tax controversy shrouding foreign funds with Mauritius links blowing over, the market regulator simplifying margin norms, the NASDAQ looking up, and Indian stocks gaining on the US bourses.

The Bombay Stock Exchange's Sensitive Index, the Sensex, soared to close at 5219 points rising by 352 points, or 7.23 per cent, over its previous close.

The National Stock Exchange's S&P CNX Nifty closed at 1557 points, a gain of 7.15 per cent, or 104 points, over Thursday.

With positive developments on all fronts, the market opened with a huge gap and gained further ground. All the top software stocks hit the upper circuit at the open and remained there for a major part of the day.

Positive news brings cheer to the bourses

On Thursday, the Central Board of Direct Taxes, or CBDT, issued a notification saying: "The capital gains earned by an investor from Mauritius, who has been issued a certificate of residence by the Mauritius government would be taxable only in Mauritius and not in India."

In view of this clarification, Finance Minister Yashwant Sinha said that the tax notices to the foreign institutional investors have been rendered invalid.

Adding to the good news was the announcement of the Securities and Exchange Board of India, or SEBI, simplifying margin norms and lower margin collections. The high margins, even as the bourses were plummeting, had raised doubts of a major payment crisis.

Dealers said that the prompt intervention by the Finance Ministry by issuing repeated clarifications on the actions against 11 Mauritius-based FIIs, improved market sentiments on the bourses, while the government's latest announcement, exempting these FIIs from capital gains tax really bring cheer to the market.

When things started turning positive on the domestic front, positive factors also joined to boost the sentiments from overseas.

High-technology stocks gained handsomely today. After pluming the depths during the past fortnight, all the new economy scrips rebounded and were locked at the upper circuit of the bourses.

As this was not enough, Indian stocks trading on the NASDAQ recorded stunning gains: Infosys Technologies was up by a massive 25.89 per cent. Satyam Infoway too was up by almost $ 6.

Dealers now expect information technology to rise further, saying that the time is good to make purchases at these counters.

Operators said that the software, media and telecom stocks were the biggest gainers of the day. The engineering, fast moving consumer goods, cement, chemical, consumer durable, pharmaceuticals and many other sectors were also in the limelight.

Buying spreads across the board

The buying spread to non-software stocks. Reliance, HLL, ITC, Talc, Ranbaxy, MTNL, and HPCL recorded handsome gains, and helped the Sensex.

Reliance, Himachal, Satyam, HLL and Zee topped the volume chart accounting for 38 per cent of total trading volume on the BSE. Trading volume remained low as most of the stocks in demand were at the upper circuit.

The finance minister's withdrawal of income tax queries on five Mauritius-based foreign institutional investors was responsible for today's rally. The rally was broad-based.

A fund manager with a leading foreign asset management company says, "The market sentiment which changed at the fag end of yesterday's trading session spilled over today with the key sentiment stocks like Himachal Futuristic, Global Tele-systems and Satyam Computer staging a smart rally. Second, the decision by the finance minister to withdraw the tax notice on 5 of the affected FIIs changed the sentiment for good."

With the government of India and the Income-Tax department clearing the confusion over the double-taxation avoidance treaty with Mauritius, the panic seems to have subsided.

The recovery of Indian stocks listed on the US markets and the government of India's clarification on the issue of notices to FIIs using the country's double taxation treaty with Mauritius, has seen the panic at Dalal Street subsiding.

Asian markets stage recovery, too

After swaying wildly earlier this week, gyrating to the tunes played on Wall Street, Asian infotech and telecom stocks finally came into their own and staged a sharp recovery today.

With the NASDAQ playing Pied Piper and closing higher for the second successive day, there was heavy demand for new economy scrips in the Asian markets.

Stock markets in South Korea and Hong Kong, riding the wave, were able to substantially reduce their losses.

Singapore bourses went a step forward, to close the week on a cheerful note.

Most of the investors were anxiously awaiting the Federal Reserves moves on rate-cuts as well as US jobs data to gauge the mood of the markets when the new week begins on Monday.

Tokyo's Nikkei 225 rose up to 20,463.67 during the day, but later slipped to end slightly higher as traders decided to exercise caution and booked profits just before the close for the weekend.

In Hong Kong, Hang Seng closed about 2.7 per cent higher, following bargain hunting in new economy stocks.

Although there has been a lot of noise regarding the high-technology stocks after the correction at the NASDAQ, the new economy scrips are still being seen as sound investment areas, especially from the long- to medium-term perspective.

Additional inputs: UNI

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