Equities were expected to follow other Asian markets, which were down tracking a 6 per cent fall in the US markets, but by the time Indian markets opened, the Asian indices had recovered from their lows after Bank of Japan left interest rates unchanged.
Speculation that the US government will take steps to help Citigroup brought optimism back, say market men. Shares of the US banking major had lost 26 per cent in a single session due to the financial crisis on Thursday.
The board of Citigroup is scheduled to meet later today to look at options, including outright sale of at least part of the bank.
“Possibility that the US government may not allow Citigroup to fail and extend support in form of a merger or bail it out saw traders cover short positions in global markets, and in India. But there was dearth of genuine buying as investor confidence is still low,” said Satish Kannav, senior analyst at Arihant Capital Services.
Bombay Stock Exchange’s Sensex missed the psychological mark of 9,000 and closed at 8,915.21, up 464.20 points or 5.49 per cent from Thursday. It touched an intra-day high of 8988.03 and low of 8442.31.
National Stock Exchange’s Nifty ended above crucial the support of 2600. The broader index closed at 2693.45, up 5.50 per cent or 140.30 points. It touched a high of 2718.60 and low of 2539.80 during the day.
Second rung stocks under performed the benchmarks. BSE Midcap Index ended up 0.72 per cent and BSE Smallcap Index closed up 0.16 per cent.
“October low of 2525 is an important support level and in yesterday’s trade we managed to sustain that level which is good sign. In the short-term, Nifty has formed a double bottom around this level and we may see an upside from here. In addition, gains in the US markets will lead to much awaited relief rally,” Kannav added.
Amongst the sectoral indices, BSE Power Index closed 6.21 per cent up, BSE Oil&Gas Index ended 5.69 per cent higher and BSE Capital Goods Index advanced 5.59 per cent. However, realty stocks continued to be beaten down. BSE Realty Index fell 2 per cent lower.
Reliance Infrastructure (14.07%), Reliance Communications (13.64%), Sterlite Industries (9.10%), NTPC (8.80%) and HDFC (8.49%) were the top gainers, while DLF (-3.41%), Jaiprakash Associates (-2.18%), ACC (-2.08%) and Tata Power (-0.47%) ended with losses.
Market breadth on BSE, however, remained negative with 1,293 declines against 1,177 advances.
European markets followed the Asian trail and were trading higher led by gains in banks and metal shares. FTSE 100 was up 0.51 per cent, DAX 30 was up 0.10 per cent.
US markets are likely to see a strong rally as stock futures suggest. Dow Jones stock futures were up 3.27 per cent, S&P 500 stocks futures gained 3.35 per cent and Nasdaq futures moved 3.39 per cent higher.