(RTTNews) - Tuesday, the Indian market made a strong comeback, recovering more than 5% intra-day amid support from domestic financial institutions and short covering on expectations that a revised rescue package for the US financial sector would be put forward quickly by the US administration. The positive talk by the Finance Minister, RBI and SEBI about capitalization of Indian banks, liquidity, resilience of the Indian markets among others perked up investor sentiment.

Higher US futures and some recovery in the European markets towards close of the session added to positive sentiment. Banking, capital goods, realty and telecom stocks led the recovery, while metal and FMCG stocks ended in negative territory. On the BSE, the market breadth was slightly negative, with 1310 stocks declining compared to 1281 stocks that gained.

The Securities and Exchange Board of India (Sebi) said that it is closely monitoring the markets and there is no reason for panic. The Sebi has verified with the stock exchanges and there are no determined issues, said Sebi Chairman C B Bhave. “The market surveillance system is already in place. There are no worries on that front. We have no apprehension that institutional investors are short selling,” Bhave said. There are no volumes in the borrowing and lending markets, he added. Indian market is resilient and the clearing system has proved to its ability to deal with stock market fluctuation, Bhave said.

The Reserve Bank of India (RBI) assured that ICICI Bank has sufficient liquidity and the bank’s units abroad are “well capitalized”. “There are reports in some sections of the media that based on rumors regarding the financial strength of ICICI Bank, depositors are withdrawing cash at its ATMs and branches in some locations,” the RBI said in a statement. The RBI maintained it is monitoring the developments and has arranged to provide adequate cash to ICICI Bank to meet the demands of its customers at its branches and ATMs.

Regulations in the Indian market are adequate, said the finance minister P Chidambaram on Tuesday. “There is nothing to worry about. The regulations that are in place are adequate. If the regulations are to be tweaked, we will do so,” he said. Indian banking and financial sector is well capitalized, the statement from the ICICI Bank should reassure depositors, he noted.

After opening lower at 12,178, the BSE Sensex rose remarkably to close near the day’ s high. Shrugging off the global worries, the benchmark ended at 12,860, up 265 points or 2.10% over the previous close. The mid-cap index gained 1.46%, the small-cap index edged up 0.44% and the broad-based BSE 500 index added 1.82%. Meanwhile, the S&P CNX Nifty finished at 3,924, up 74 points or 1.92%.

ICICI Bank (up 8.42%), TCS (up 6.96%), HDFC (up 5.33%), Bharti Airtel (up 5.14%), BHEL (up 5.07%) State Bank of India (up 4.32%), Larsen & Toubro (up 4.16%), Jaiprakash Associates (up 4.12%), Maruti Suzuki (up 3.73%), NTPC (up 3.31%), HDFC Bank (up 2.46%), Reliance Communication (up 2.33%), Mahindra & Mahindra (up 1.43%), Satyam Computers (up 1.38%), ONGC (up 1.20%) and Hindalco (up 1.09%) were among the major gainers.

However Tata Steel (down 4.43%), Tata Motors (down 3.27%), Ranbaxy Laboratories (down 3.17%), Grasim Industries (down 2.58%), Tata Power (down 1.31%) followed by ITC, Hindustan Unilever, Sterlite Industries, Wipro and Reliance Infrastructure ended in negative territory.

Stocks in News

Banking stocks made a strong comeback after the finance minister said that Indian banking and financial sectors are well capitalized. Metal stocks declined sharply, tracking lower LME prices on concerns that the global turmoil will reduce industrial demand for metals.

Public sector oil marketing companies spurted after crude oil tumbled more than $10 a barrel on Monday. State-run firms sell fuel at subsidized prices fixed by the government. A sharp retreat in the price of oil raised expectations about improved gross refining margins, as lesser purchase prices will cut under recoveries.

ICICI Bank spurted 8.42% after the bank said it has zero exposure to the US sub prime credit markets. An announcement from the RBI that the bank and its subsidiaries are well capitalized and the RBI has arranged to provide adequate liquidity to the bank to meet its demands has perked up investor interest in the stock.

Bharat Heavy Electricals rose 5.07% after the company bagged new orders worth Rs.990 crore for setting up a thermal power plant in Rajasthan. Jet Airways India gained 1.46% on reports that the company plans to raise funds through a stake sale of up to 10%. Shree Cement ended down 0.25% after the company commissioned an 18- megawatt turbine generator (TG) set up at Bangur city in Rajasthan.

NALCO ended up 0.66% despite reports that the company has halved its alumna production at its refineries due to a severe coal shortage. Shipping Corporation of India lost 3.99% after the company fixed October 31 as the record date for a 1:2 bonus issue to its shareholders. Era Infra Engineering soared 4.70% after the company proposed to invest Rs.25 crore in India Reality Excellence Fund and another Rs. 20 crore in Axis Infra Structure Fund.

Tech Mahindra ended up 0.98% even as reports said that BT Group has put its stake sale plans in the company on hold due to turbulent market conditions. Pyramid Saimira slumped 6.61% after the company said it would invest around Rs.200 crore in the next 18 months for renovating 250 theatres in the 4 states of South India. Sanghi Industries shed 3.98% on reports that the company has deferred its Rs.1500 crore expansion plans due to an ongoing feud between two factions of the management.

Tube Investments of India ended up 0.90% after the company sold a 26% stake in its joint venture company BorgWarner Morse Teo Murugappa for Rs.20.40 crore. Ashok Leyland added 2.12% after the company formed a 50:50 joint venture with John Deere for manufacturing and marketing of construction equipment.

Asian Markets

Markets across the Asia-Pacific region closed mostly lower. Japan’s Nikkei 225 index plunged 4.12% and South Korea’s KOSPI Composite index slipped 0.57%, while Hong Kong’s Hang Seng index ended up 0.76%. The financial markets in China and Indonesia remained closed on account of public holidays.

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