The market left behind its two-day correction today amid resolute buying interest from retail and institutional investors.

As a result, the 30-share Bombay Stock Exchange (BSE) sensitive index jumped 42.88 points or 1.2% to 3,490.33 after around one-and-a-half hours of trading . The S&P CNX Nifty was up 13.24 points or 1.2% to 1,098.55.

Today's early surge comes after the Sensex eased slightly over the last two trading sessions on profit taking. The Sensex had scaled a 14-month closing high of 3,499.50, gaining 145.36 points or 4.3%. last week.

"There is buying from retail investors. FIIs are buying," said a dealer with a domestic brokerage commenting on today's rally in the market.

Most pivotals in sectors ranging from cement, steel, automobiles, pharmaceuticals, petrochemicals to FMCG were in demand today. These included Grasim Industries (up 4.8% to Rs 468.80), Hindalco Industries (up 3.8% to Rs 738), MTNL (up 3.5% to Rs 110.85), Dr. Reddy's Laboratories (up 3% to Rs 1,045), L&T (up 2.4% to Rs 237), ACC (up 2.4% to Rs 160.75), Nestle India (up 1.9% to Rs 572), HCL Technologies (up 2.2% to Rs 141.70), Zee Telefilms (up 1.8% to Rs 86.10), Cipla (up 1.8% to Rs 738), Telco (up 2% to Rs 191), Tisco (up 1.6% to Rs 162), Reliance Industrie (up 1.7% to Rs 325.80), ITC (up 1.5% to Rs 742.50) and Ranbaxy Laboratories (up 1% to Rs 716).

Buying was witnessed on a number of side counters. Side counters across a host of sectors have staged a spirited rally on the bourses in the last couple of months.

The undertone of the market is bullish according to dealers. There are also expectations that a cut in US interest rates may be effected by the Federal Reserve today. "A major rate cut in the US should spur domestic bourses," says a dealer. The US Fed is widely expected to lower fed funds rate, the interest rate banks use when lending each other money overnight, at the conclusion of its meeting Wednesday afternoon. But Wall Street remains split as to the size of the expected cut - a 25 basis points cut or a 50 basis point cut.

The Dow Jones industrial average gained 36.90 points to 9109.85 on Tuesday ahead of the Fed meet. US markets, including the Nasdaq, have staged a remarkable comeback in the past few weeks/months, which in turn has aided the rally in Indian markets.

In addition, a surge in FII inflows, the strong response to the Maruti IPO, strong corporate performances by Indian Inc for Q4 and FY 2003 and the advance of the monsoon have boosted the bourses, which have surged sharply over the last two months. The monsoon is a key factor for the fortunes of Old Economy companies in key sectors like pharmaceuticals, cement and FMCG. It is reckoned that a good monsoon will set off an increase in purchasing power among the rural populace. Some reports suggest that the monsoon this year will prove much better than expected.

Even though foreign institutional investors (FIIs) remained net buyers, their inflows witnessed a bit of slowdown on Monday 23 June 2003. FIIs put in a net Rs 48.10 crore on Monday. But those inflows need to be viewed in the context of a surge in inflows recently. FIIs pumped in between Rs 100 crore and Rs 377 crore in the preceding four trading sessions. The cumulative inflow for June 2003 has risen to Rs 1,993.30 crore (till 23 June 2003). The cumulative FII inflow in calendar 2003 (which also includes inflows in the debt market) has reached Rs 9,162 crore. These inflows are much higher than the Rs 2,328 crore recorded in the corresponding period last year.

The surge in FII inflows this year is attributed to a shift in FII focus from South East Asian markets like Hong Kong and Singapore which have been affected by SARS. Besides, China is also expected to see a fall in GDP growth and that too has resulted in the shift in focus towards India, analysts say.