Sensex surges 265 points on SEBI, FinMin remarks; ICICI Bank leads rally

The 30-share benchmark index opened at 12,178.18 and touched an intraday high and low of 12,995.20 and 12,153.55 respectively.

Despite Tuesday's gain, the Sensex is still down by about 40 percent percent this year and continues to be one of the worst performers in Asia.

Twenty components rose on Tuesday, with India's largest private sector bank, ICICI Bank, leading the charge. The bank surged 8.42 percent to Rs.534.85 on assurances made by the central bank and the finance minister that it had sufficient liquidity and was well capitalized. Ever since US investment bank Lehman Brothers filed for bankruptcy, ICICI Bank's shares plunged on worries that its exposure to Lehman would considerably hurt its balance sheet.

Other financial stocks viz. Housing Development Finance Corporation, State Bank of India and HDFC Bank, taking the cue, jumped 5.33 percent, 4.32 percent and 2.46 percent to Rs.2141.15, Rs.1465.65 and Rs.1229 respectively.

Tech stocks Tata Consultancy Services, Satyam Computer Services and Infosys Technologies soared 6.96 percent, 1.38 percent and 0.40 percent to Rs.662.75, Rs.296.60 and Rs.1397.55 respectively.

Telecom majors Bharti Airtel and Reliance Communications climbed 5.14 percent and 2.33 percent to Rs.785.05 and Rs.333.90 respectively.

Auto majors Maruti Suzuki and Mahindra & Mahindra advanced 3.73 percent and 1.43 percent to Rs.687.15 and Rs.509.25 respectively.

Engineering and construction major Larsen & Toubro (L&T) moved up 4.16 percent to Rs.2442.85 while top listed Reliance Industries ended up 0.80 percent at Rs.1946.35.

Other gainers were BHEL (up 5.07 percent at Rs.1586), Jaiprakash Associates (up 4.12 percent at Rs.111.10), NTPC (up 3.31 percent at Rs.171.75), ONGC (up 1.20 percent at Rs.1035.55), Hindalco Industries (up 1.09 percent at Rs.97.70), DLF (up 0.51 percent at Rs.352.40) and ACC (up 0.18 percent at Rs.611.65).

The top loser of the day was Tata Steel, which plunged 4.43 percent to Rs.425.60.

Tata Motors sank 3.27 percent to Rs.344.20.

Generics drug maker Ranbaxy Laboratories continued its poor run, dropping 3.17 percent to Rs.247.75.

Other losers were Grasim Industries (down 2.58 percent at Rs.1687.60), Tata Power (down 1.31 percent at Rs.906.05), ITC (down 1.31 percent at Rs.188), Hindustan Unilever (down 1.16 percent at Rs.251.55), Sterlite Industries (down 1.02 percent at Rs.428.45), Wipro (down 1.01 percent at Rs.339.65) and Reliance Infrastructure (down 0.45 percent at Rs.790.30).

Among the sectoral indices, all the counters closed in the green except Metal (down 1.66 percent) and FMCG (down 0.86 percent). The best performing counter was Bankex (up 4.92 percent).

The BSE Midcap and Smallcap indexes closed 1.46 percent and 0.44 percent higher at 4798.29 and 5577.47 respectively.

The market breadth was slightly negative as 1316 shares declined, 1277 shares advanced and 79 shares closed unchanged.

Elsewhere, the broader 50-share S&P CNX Nifty index of the National Stock Exchange (NSE) rose 1.85 percent or 71.15 points to close at 3921.20.

Market analysts said positive assurances made by the capital market regulator Securities and Exchange Board of India (SEBI) and Finance Minister P. Chidamabaram helped soothe jagged nerves of investors and boost market sentiment.

The market mood was negative for the past few trading sessions on worries that the domestic financial institutions' market-to-market (MTM) exposure to various credit instruments issued by overseas financial institutions, especially the bankrupt Lehman Brothers would deflate their balance sheets and the credit crunch, which has sent Wall Street reeling would affect India's capital market too.

However, on Tuesday, SEBI chairman C.B. Bhave said that investors had no reason to panic as the regulator was monitoring the market situation very closely.

"India will emerge stronger once the global crisis comes to an end," Bhave said.

Concurring, Finance Minister P. Chidambaram said that the present set of market regulations is adequate. He said that the market situation was being monitored and that the Indian banking and financial system was very well capitalized. "There is nothing to worry about the Indian market. We are suffering the consequences of turbulence around the world. The regulations that are in place are adequate. Regulation would be tightened if needed to deal with the consequences of a widening global financial crisis," Chidambaram said.

"Indian banks are well capitalized and regulated," the finance minister said, adding, "Indian markets are sound, still attractive for investors and we are watching the situation round the clock."

"It may be assuring for some people, though we were never worried. We like Indian valuations. Some businesses may get hurt due to the credit crisis, but we feel there are many companies that will be able to manage," said I.V. Subramaniam, director at Quantum Asset Management.

According to analysts, investors had overcome Monday's setback when the US House of Representatives thumbed down President Bush's $700 billion financial bailout plan and were optimistic that the US Congress would eventually pass it.

"Nobody knows what's going to happen tomorrow. But as the Asian markets recovered and Dow futures are up, shorts had to be covered," said Gajendra Nagpal, CEO at Unicon Financial.

"And it is obvious that the first round of buying would come in these India plays," he said.

Meanwhile, prices of global crude oil rose towards $98 per barrel on Tuesday, rebounding after a near 10 percent drop in the previous session in response to the rejection by US lawmakers of a financial sector rescue plan.

Elsewhere in South Asia, Pakistan's Karachi 100 and Sri Lanka's Colombo All-Share eased 0.03 percent and 1.98 percent to 9179.68 and 2142.26 respectively.

The Asian markets close in the red on uncertainty whether the US Congress would approve the $700 bailout plan aimed at lessening the credit crunch in the US financial market.

Japan's Nikkei 225 plunged 4.12 percent to 11,259.86; China's Shanghai Composite declined 0.16 percent to 2293.78; Taiwan's Taiex sank 3.55 percent to 5719.28; South Korea's Kospi tumbled 0.57 percent to 1448.06; Indonesia's Jakarta Composite eased 0.74 percent to 1832.51; Singapore's Straits Times moved down 0.10 percent to 2358.91; and Malaysia's Kuala Lumpur Composite ended down 0.10 percent at 1018.68.

However, bucking the trend, Hong Kong's Hang Seng climbed 0.76 percent to 18,016.21.