Market recovers in dying hours but is it really out of the woods?

Markets recovered in the last hours of trade today primarily on short covering of positions due to derivative expiry. The BSE Sensex rebounded one percent led by engineering conglomerate Larsen & Toubro and mobile operator Bharti Airtel, after European markets held their ground and raised hopes for a revival in foreign fund inflows.

The market gathered steam in the last 45 minutes of trade after drifting down for most of the day as expectations grew that government will push key reforms to boost business confidence and halt a slowdown in growth.

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The rupee’s fall and hopes for stabilisation makes Indian stocks more attractive for foreign portfolio investors, but they will still wait for a “comfort level” before pumping in cash,say experts.

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Foreign funds have been net sellers of more than $600 million worth of shares over six trading sessions till Tuesday, reducing the net inflows in 2011 to about $113 million, sharply below record investments of more than $29 billion seen in 2010.

But are the markets out of the woods?

Firstpost markets editor, Shishir Asthana, says the Nifty can see a technical bounce back to 5,100 levels if the European markets continue to hold up. Moreover, mid cap stocks have performed better than the large cap stocks today, especially in the F&O space.

Apart from Europe, expectations for a reform push in the retail sector also led to a good rally in retail stocks today.

Pantaloon was up 12 percent today at Rs 200, its highest close in more than six weeks, while Vishal Retail surged 8.6 percent and Shoppers Stop added 5.5 percent.

Energy major Reliance Industries, India’s most-valuable firm and the heaviest stock in the main index,ended little changed, while software bellwether Infosys Ltd erased early losses to close 0.5 percent up.

The 50-share NSE index gained 1.06 percent to 4,756.45. In the broader market, there were 824 gainers beating 617 decliners on heavy volume of about 835 million shares.

Listen to our market wrap below: