The markets opened lower ahead of the release of industrial output numbers for April and on doubts that the financial aid to Spanish banks would not be the end of Europe’s debt problems.
Meanwhile, the rupee lost 11 paise to Rs55.85 against the dollar in early trade following dollar gains against other currencies overseas amid a weak trend in the equity market. The Indian unit had closed at 55.74 against the greenback in the previous session as dollar demand from banks and corporates emerged after S&P warned that it could lower India's rating.
Although the Index of Industrial Production (IIP) for April came in at 0.1%, buying interest on hopes that the RBI would cut interest rates in its mid-quarter review next week pushed the indices higher in late morning trade.
The market extended its gains in subsequent trade on support from banking, auto, oil & gas, metals and capital goods sectors. A positive opening of the key European markets also boosted investor confidence.
Nifty ended at 5,111.75, up 61.80 points or 1.22%. It touched an intraday high of 5,128.90 and a low of 5,015.15. The six days of positive move on the Nifty, which happened since 4 June 2012 has retraced nearly 62% of the fall that happened between 20 April 2012 and 4 June 2012. Sensex closed at 16,850.98, up 182.97 points or 1.1%. It touched an intraday high of 16,897.42 and a low of 16,553.47
The US markets showed a strong move back to the upside during trading on Tuesday ending the day near the highs of the session. The markets benefited from bargain hunting following Monday's sell-off aided by pullback by Spanish bond yields (6.8%). Dow Jones industrial average gained 162.57 points, or 1.31%, to 12,573.80. The Standard & Poor's 500 Index rose 15.25 points, or 1.17%, to 1,324.18. The Nasdaq Composite Index added 33.34 points, or 1.19%, to 2,843.07.
Asian shares trimmed earlier gains in choppy trade on Wednesday, with worries over contagion from Spain's banking sector heightening after the country's bond yields hit record peaks. Japan's Nikkei 225 index was trading 0.5% higher at 8,584.75 and Hong Kong 's Hang Seng index was trading lower at 18,863.12, down 0.05%. South Korea 's Kospi index was trading 0.15% lower at 1,851.45. China 's Shanghai index was trading flat at 2,290.
The 30-share BSE Sensex and 50-share NSE Nifty opened flat on Wednesday after yesterday's more than 1% rally on rate cut hopes.
Sensex fell just 25.5 points to 16,837.32 and the Nifty slipped 6 points to 5,110.05.
The partially convertible rupee was trading at 55.78/80, slightly stronger than its 55.80/81 close on Tuesday.
Auto stocks such as Maruti, M&M and Tata Motors lost in early trade on news of a possible hike in prices of diesel cars.
U.S. crude fell 0.6%to $82.81 a barrel, after hitting a 2012 low of $81.07 in intraday trading on Tuesday. Brent eased 0.2%to $96.91 a barrel.
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