Indices recover from previous week''s fall and post new highs

Rex Mathew
01 October 2005

The markets recovered smartly during the week from last week's sharp fall. If the fall surprised many by the speed and extent, the recovery was no less surprising. Over the last weekend, most analysts had predicted a further decline especially since the frontline indices had failed to bounce back on the last day of the previous week after the crash.

All these prognosis were proven wrong on Monday itself as the frontline indices posted one of their best ever intra-day gains closing with gains of 3 per cent each. The recovery was helped to a large extent by the huge short positions built up during the previous week. As the markets started recovering, the short sellers were forced to cover up especially since the derivatives expiry was coming up later this week.

The indices maintained their up trend for the first four days of the week. The Sensex and the Nifty crossed their previous highs by Wednesday and posted new lifetime highs on Thursday. The Sensex traded above the 8700 mark in Thursday before giving up part of the gains later in the day. The derivatives settlement was completed smoothly on Thursday.

Friday saw some profit booking emerge and the indices took a breather. SEBI action against some broking outfits and promoters of smaller companies led to market rumours. The indices declined more than a per cent in intra-day trades before recovering and closing with marginal losses.

The Sensex gained 412 points or 5 per cent during the week and the Nifty added 123 points or close to 5 per cent over the week.

Mid-caps also recovered during the early part of the week. However, the momentum seen in many of the prominent mid-cap stocks during the last few weeks was missing. Correction in mid-caps started on Thursday even as the frontline indices closed on new highs. It continued on Friday as well though some recovery was seen in late trades. The CNX Mid-Cap 100 gained 145 points or close to 4 per cent during the week.

The small caps on the BSE also managed a sharp recovery on Monday, which saw the small cap index gaining close to 5 per cent. However, a large number of small stocks were locked in the lower circuit for most of the week. The BSE small cap index lost close to 2 per cent on Thursday as well as Friday.