Pro-UPA mandate takes market to a dizzy high; trading halted

Mumbai, May 18 (PTI) India's stock markets Monday broke
all records driven by the pro-UPA mandate in the polls and
rallied by an unprecedented 2,111-points in just a minute of
trading, forcing authorities to suspend business for the day.

Eager buyers were left gaping and the day was over even
before they could formulate their thoughts of a buy order in a
frenzied market that witnessed an appreciation of Rs 6.5 lakh
crore in market capitalisation as the BSE-Sensex surged to
14,284.21 points.

Trading was first halted at 0955 hrs for two hours and
subsequently for the day within 30 seconds of commencement
each time because of buying frenzy, a sentiment that was in
sharp contrast to a panic selling-driven halt in trading
around the same time in 2004 days before UPA came to office.

The story was no different at the National Stock
Exchange, where a minute of trading in two sessions saw prices
breaching all records of a single day jump, although
transactions were limited. NSE's Nifty closed the day higher
by 651.5 points at 4,325.15 points.

Marketmen said they would not be surprised if the circuit
breaker is applied once again tomorrow while not ruling out
BSE Sensex breeching 15,000 points mark.

Shares of less than 1,000 companies could be traded
Monday and the two exchanges recorded a turnover of just Rs
300 crore, a meagre two per cent of their average transaction.

The Finance Ministry was not perturbed, saying regulator
Securities and Exchange Board of India was keeping a vigil on
the situation to guard against any foul play.

Sebi called a meeting of exchange authorities to take
stock of the situation and discussed all possible steps that
may be needed to ensure proper functioning of the market. The
authorities, in turn, decided to continue with the current
system of circuit breakers to check excessive movement.

Circuit breaker is a mechanism, wherein trading is
automatically halted for one hour if the benchmark indices
rise or fall by 10 per cent of the closing level of the last
quarter. A movement of 20 per cent halts the trading for the
entire day.

Market leader Reliance Industries was the singularly
largest gainer recording an appreciation of Rs 70,000 crore in
wealth for stakeholders in an all round increase in share
prices, but there were few unfortunate scrips like K Sera
Sera, Cinemax India and Adhikari Brothers TV that lost value.

Analysts across the board felt that the 'unheard' of
market response was a response to the UPA getting a new term
in office and the stability that comes along with it in terms
of pursuing reforms without having to bother about Left
parties like in the past.

Markets are most likely to scale the 15,000 mark
tomorrow, at which point of time there might be selling
activity, say analysts.

"Market is most likely to remain neutral. It may see
small movement of 500-700 points. It may, however, witness
15,000 mark in intra-day trade at which point of time it may
see sell-off," Keynote Research Senior VP Nitin A Khandkar
said.

Tata Asset Management Managing Director Ved Prakash
Chaturvedi, however, said: "It needs to be kept in mind that
whatever has happened in the last 48 hours does not change the
earnings momentum trajectory for the next few quarters. The
global environment is still in the process of limping back to
normalcy."

Short term euphoria can take market valuations to
stretched levels and investors need to be cautious about this
near term euphoric state, though clearly the long term
economic view is bright, Chaturvedi added.

Kejriwal Research and Investment Services Head Arun
Kejriwal said: "What happened in the market is pure euphoria.
There is no justification for a 2,000 point rally with such
low turnover both in equities and futures.

"It is an artificial rally fuelled by speculative buying.
But whatever happened in the market is not good."

The economic atmosphere in the world as well as India has
not changed. Today India is one of the most costliest markets
among emerging markets and prices have to cool off before
money starts to flow in, Kejriwal added. PTI DRR
PMR
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