Sensex rebounds after early loss, ends 171 pts higher on rate cut hopes

Equity markets overcame early round of pessimism, as a broad market recovery led by an uptick in banking shares amid hopes of a rate cut next week helped reverse the trend in the second half, while a strong European markets opening further boosted sentiment after a sluggish Chinese economic data earlier in the day had pushed local shares deep in the red. In a trading session marked with extreme volatility, the Sensex gyrated nearly 550 points intra-day before wrapping up the session with smart gains of 171.15 points or 0.7 percent higher at 25,822.99. [caption id=“attachment_2443532” align=“alignleft” width=“380”] Reuters[/caption] Besides banking shares, strong buying in oil & gas, realty and consumer durable shares propelled index to the day’s high of 25,934.02, up 282 points. The broader 50-stock CNX Nifty closed at 7,845.95, up 33.95 points, or 0.4 percent. However, much before the recovery, the 30-share benchmark Sensex came under heavy selling pressure in the first half of trading session, which saw it tumbled to the day’s low of 25,386.48, down 266 points. Early fall in key indices was mainly attributed to the weak Chinese factory data, which shrunk more than expected, further raising fears of a lingering global economic slowdown. Amid the worsening global economic climate, Chinese data announced earlier today showed that its preliminary Purchasing Managers’ Index from Caixin Media and Markit Economics slowed to 47.0 in September, missing the median estimate of 47.5 in a Bloomberg survey. A reading below 50 suggests slowing growth. The data had a bearing on key Chinese indices, as Hang Seng dropped 2.3 percent to end at 21,302.91 and Shanghai Composite fell 2.2 percent to close at 3,115.89. On the other hand, European gauges showed early buoyancy with key indices trading over 1-1.3 percent higher in mid-day trade, shrugging off the disappointing Chinese data. “Firm European markets opening helped local shares to rebound. We saw buying in banking shares on hopes of rate cut next week. However, the market may continue to stay volatile due to uncertainty in global markets. As there is lack of clarity from both internal and external factors, FIIs have adopted a cautious stance and are pulling out of Indian markets,” said Arun Kejriwal, founder, KRIS Research. Market breadth ended firm with 1,531 stocks advancing against 1,141 declines on BSE. Leading the recovery, shares of Lupin rose 2.8 percent to Rs 1,921.30, Vedanta jumped 2.7 percent to Rs 94.85, HDFC Bank advanced 2.2 percent to Rs 1,049.95, M&M rose 2.1 percent to Rs 1,211.75, ITC added 1.7 percent to Rs 317.40, ICICI Bank jumped 1.2 percent to Rs 273.90 and SBI was up 0.9 percent at Rs 240.10. Others such as Infosys, Coal India, L&T, ONGC, Maruti, Hero Honda and Axis Bank were up around a percent each.