Indian shares rebound but nervousness persists

MUMBAI - Indian shares strengthened Wednesday after two straight days of heavy losses spooked local investors who took the benchmark index to its lowest level this year and remain nervous, dealers said.

By (AFP)

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Published: Wed 14 Jun 2006, 3:32 PM

Last updated: Sat 4 Apr 2015, 3:24 PM

In afternoon trade, the 30-share Sensex was up 116.59 points or 1.29 percent to 9,179.24 in low-volume trade.

In early trade, the index had gained as much as 3.57 percent to 9,387.06.

“Trading is still cautious. There is no market breadth. The markets have not yet bottomed out and it would be difficult to predict a range,” said Vijay Tilakraj, senior dealer with brokerage Prabhudas Lilladher.

Dealers said Wednesday’s rise was in technical terms a “relief rally.”

The Sensex closed down 413.50 points Tuesday at 9,062.65 after hitting an intra-day low of 8,993.58, a tumble of 7.6 percent since Monday.

The market has lost nearly 30 percent from its record closing high of 12,612.38 on May 10.

Fund managers Wednesday said Indian markets could now remain rangebound for several months as foreign funds survey the prospects for continued global economic growth amid interest rate and inflation concerns.

Local investors will have to grapple with the same issues given the pressure rising oil prices is having on inflation, which prompted the central bank to hike interest rates last week.

“Banks and retail investor confidence is shaken. We could see a further tightening of US interest rates and a pull out of overseas funds,” said Hiten Mehta, fund manager with Fortune Financial Services.

“Higher inflationary trends (in India) and higher short-term rates could slowdown growth prospects too,” he said.

Investors say a surprise quarter percentage point rate rise, to 5.75 percent by the Reserve Bank of India on June 8 to stem inflation, led to concern about a slowing economy.

The central bank is due to hold its next review of monetary policy in July.

“The markets could take at least 3-4 months to stabilise,” Mehta said.

After a sharp May sell-off, June investment data trends are unclear.

Market regulator figures show foreign funds -- the largest active investors -- as net buyers of 206 million dollars of Indian equities in June.

However local funds have sold 14.21 billion rupees (308 million dollars) worth of shares in June, with retail investors still largely out of the market.

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