Short Covering takes markets and Rupee higher

Indian equities gained for second consecutive day. After bouncing off the 5280 support the markets have run over 200 points from Wed lows. Today the index closed 61 points up at 5472 and the Sensex closed 207 points up at 18519. All major sectors baring realty had a field day, but aviation and infrastructure stocks stood out gaining anywhere between 5 and 10%. Banks and IT also had a good day apart from Reliance.

Rupee also had a short covering. Though the rupee opened flat with a negative bias in the morning, flirting with the Rs. 65 mark, the last one hour the pull back was ferocious. The rupee ended cover 2% stronger at 63.20. Taking a cue from the stabilising rupee bond yields also cooled down. The 10 Yr G-sec ruled at 8.26 sharply lower from the decade high of 9.48 on Wednesday.

This pull back was in the offing especially after the extremely oversold levels the indian equities and the currency moved into. It is now left to be seen where this short covering will take the markets to. However there is no reason why markets will have to go significantly high from these levels. The story is the same for the currency as well.

----- Harish Sridharan