The benchmark indices rallied on Wednesday after a technical glitch halted trading for several hours on the National Stock Exchange (NSE) and forced the exchanges to extend trading hours.
The Sensex ended 1,030 points, or 2.07 per cent, higher at 50,781, while the Nifty50 index gained 274 points, or 1.86 per cent, to end the session at 14,982. This is the Sensex’s largest gain since February 2. The 30-share index had dropped to an intra-day low of 49,649 due to a sharp decline in blue-chip stocks such as TCS and ITC.
Market players attributed the surge in the market to short-covering and squaring off of open trades. Several orders created on NSE had to be squared off on the BSE as the former had not provided any clarity on when trading would resume. Market players said this triggered hurried squaring off, resulting in potential losses for several investors.
For instance, shares of TCS plunged as much as 9.4 per cent ahead of the close of normal trading hours.
Both NSE and BSE extended the trading hours till 5 pm to help investors with open positions. However, the announcement on extension of trade came only at 3.20 pm, and by then many had already squared off their cash market intra-day positions.
“Due to the weakness in the previous few sessions, several traders had built up short positions anticipating declines. However, as trading resumed, investors had only a few hours to cover their shorts. With Thursday being the derivative expiry day, we saw a lot of short covering, which pushed markets higher,” said Chandan Taparia, derivatives and technical analyst, Motilal Oswal Financial Services.
Navneet Dagga, lead derivatives analyst – institutional equities, YES Securities, said, “Due to the weakness in the market, there was an excessive amount of call writing. Many algorithms got triggered as there was a significant amount of open interest both from Bank Nifty and Nifty on the upper strike call options. The open interest halved in the last hour. Basically, a lot of call writers got trapped, as they had to cover the position on the upside.”
Market players said stock prices were also boosted by positive global cues. European markets traded about a per cent higher on the back of encouraging outlook from the US Federal Reserve and promising economic data.
More than two-thirds of Sensex components ended the session with gains. HDFC Bank was the best-performing stock and rose 5.04 per cent, Axis Bank and ICICI Bank rose 4.6 per cent and 4.1 per cent, respectively. All the BSE sectoral indices, barring two, ended the session with gains. Banking and finance stocks gained the most, and their gauges rose 3.7 and 3.3 per cent, respectively.